The European automotive industry is facing a painful reset, as weak demand and growing competition from China, led by BYD, are forcing factories to operate at an average of only 55% of capacity, Bloomberg reports, citing AlixPartners, a consulting company.
The most vulnerable company is Stellantis, whose European facilities are used by about 45%. The consulting company expects European Automakers to lose 1-2 million sales to Chinese brands in the coming years, with these brands' market share reaching ~5% this year and possibly 10% by 2030. Since factories are typically profitable only when they produce more than 250,000 units per year, the presence of Chinese manufacturers with a production capacity of 2 million units could leave Europe with about eight redundant plants by 2030. Plant closures are a slow and expensive process - about 1.5 billion euros and one to three years for a plant with 10,000 workers — and are complicated by strong union representation that can block decisions, especially in Germany.
Recent signs of tension include Volkswagen's week-long pause in Zwickau and the temporary shutdown of Stellantis on the Fiat Panda and Alfa Romeo Tonale production lines. Despite a modest 0.9% recovery to about 13 million registrations last year, demand remains below pre-pandemic levels. Volkswagen eventually abandoned the first-ever factory closure in Germany after lengthy negotiations, opting instead to cut capacity and 35,000 jobs. According to AlixPartners, executives will need convincing arguments to justify any closure.
