The EU’s industrial powerhouse is plagued by falling orders and growing production costs
Germany’s automobile industry is in decline and the country needs assistance to salvage it, Russian President Vladimir Putin said during a visit to the All-Russia Exhibition Center in Moscow on Thursday.
“They are now destroying their auto industry. They need to be helped somehow,” Putin stated in response to a story about Russia’s contribution to the emergence of the automobile industry in Germany. When asked whether the current decline is related to Russians increasingly opting for Chinese cars instead of German ones, Putin stated “not only that,” without elaborating further.
German industry – and its automotive sector in particular – has been plagued by mounting problems over the past year and a half. The competitiveness of German manufacturers has been damaged by higher energy prices after the country lost cheap gas supplies from Russia. Hildegard Muller, president of the Association of the Automotive Industry (VDA), warned last year that soaring energy costs are making Germany “lose dramatically its international competitiveness” as many companies are considering relocating their businesses elsewhere.
According to VDA data, while output from German automobile plants did manage to rise by 18% year-on-year to 4.1 million cars in 2023, this was still 12% below the pre-Covid year of 2019. Meanwhile, orders received by German manufacturers fell by 5%, with domestic orders plunging by 18%.
In March 2022, amid Western sanctions on Moscow in light of the Ukraine conflict, many German car manufacturers, including Volkswagen and Daimler Truck, suspended trade with Russia and later exited the country, losing a lucrative market. The void left by German carmakers was quickly filled, however, by Chinese brands, which accounted for more than 90% of all Russian car imports in 2023.
In recent years, China has made a push to gain market share in the global automobile sector. It has now moved into second place behind Japan as the globe’s top car exporter and has been gradually either crowding out European carmakers or buying shares in their businesses. Geely, a major automotive brand based in China, acquired Swedish carmaker Volvo back in 2010, while in 2018 its founder, Li Shufu, became the largest shareholder of German automaker Daimler, the parent of Mercedes Benz.
Maksim Oreshkin, Putin’s top economic adviser, earlier warned that “companies like Mercedes and BMW may fade into history in ten years” as they now have “neither the market nor the technological advantage that they had five to ten years ago.”
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