Is our key industry declining? The "Havana Effect" is catching up with Germany's auto giants

#germany #car #economy Volkswagen will focus on quality over quantity in the future – perhaps because the Wolfsburg-based company has to. Things are looking bleak for VW and its rivals BMW and Mercedes. In China, the competition is pulling away, and here in Germany, the "Havana Effect" is plaguing the industry. "Execution, speed, and performance" – these are the points VW will focus on in the future, according to CEO Oliver Blume. That doesn't sound like a major upheaval at first. But in fact, the company's most recent Capital Markets Day at the end of June did bring about a small paradigm shift. In the future, "value over volume" will prevail. To put it more bluntly: quality over quantity. Blume himself spoke of a new management model that "prioritizes sustainable, profitable value creation over volume growth." Volkswagen, once the global sales leader, is apparently no longer striving for this title. Given the current situation, one suspects that this is also an admission. Because things aren't really going well at Volkswagen. Volkswagen generated revenue of €76 billion in the first quarter of the year, 22 percent more than the previous year. Sales and production also increased significantly year-on-year, by 6.5 percent and 11.2 percent, respectively. But some key figures read like bad omens. Deliveries in the important growth market of China collapsed by 14.5 percent between January and March. Volkswagen assures that deliveries should recover over the rest of the year. But the Wolfsburg-based company has lost its crown in the Middle Kingdom for now. Local rival BYD overtook both Volkswagen and Toyota in market share there. Volkswagen has been the market leader there since the 1980s. And then there are the problems at home. Volkswagen's first quarter was still good. But the outlook is bleak. As the "Handelsblatt" reported, both production and demand in Europe are stagnating significantly. This affects not only Volkswagen, but all major German manufacturers. Between January and May, Volkswagen, its subsidiary Audi, as well as BMW and Mercedes, produced half a million fewer cars in Europe than in the first five months of the last pre-pandemic year of 2019, the newspaper reported, citing figures from the industry service Marklines – a decline of 20 percent. During the pandemic, demand for cars, both new and used, skyrocketed. At the same time, supply bottlenecks slowed production. Thanks to higher prices, manufacturers ultimately benefited from this exceptional situation. Missing components are no longer a problem, however. Germany's auto giants are now struggling with a lack of demand. In particular, the vehicles that are supposed to be the foundation of the industry in the future are currently no longer selling. "Orders for electric cars across the industry are 30 to 50 percent lower than last year," Thomas Peckruhn told Handelsblatt. The vice president of the Central Association of the German Motor Vehicle Trade (ZDK) fears that things will get even worse towards the end of the year. By the final quarter, the order backlog will be processed, and manufacturers will no longer be able to charge high prices, according to Peckruhn. At the end of the first quarter, Volkswagen reported an order backlog of 1.8 million vehicles in Western Europe, including 260,000 electric vehicles. "Customer demand for Volkswagen Group vehicles remains high," the company said at the time.