Volkswagen intends to close three factories in Germany.

Their demise will see the execution of tens of thousands of highly-skilled jobs. At present, there are roughly 120,000 Volkswagen employees in Germany.

The Chief personnel officer called the situation ‘serious’ and that the responsibility of the ‘negotiating partners is enormous’.

These closures form part of an emergency cost-cutting exercise with a target of 10 billion euros by 2026. Volkswagen’s CEO, Oliver Blume, informed employees they will also need to address ending a 30-year protectionist pledge for job security which is meant to extend until 2029.

Management faces the perfect storm of soft demand (driven by a cost-of-living crisis and eco-push to dissuade private car ownership), a surge in raw material costs, major wage increases demanded by short-sighted unions, some of the most expensive energy prices in Europe, and competition from China which cannot be matched because Asia does not play by the same human rights and environmental standards.

The European Union deserves a chunk of the blame.

They are the leading cause of expensive renewable energy which has seen Germany’s factories – of all types – shutting down. The EU also set the electric vehicle targets and impending bans on fossil fuel cars which demands a restructuring of the car industry. The EU bureaucracy has essentially forced companies like Volkswagen to make a product with a soft market interest without the necessary tariff protections to keep China from undercutting local producers.

A casual observer could see this going wrong.

Even when an investigation was launched into Chinese electric vehicles, Olaf Scholz, the German Chancellor, stood against it saying, ‘We want to sell our cars but that means we are also open to receive cars from other countries. Now there are German cars in Korea, and Korean cars in Germany – what is the problem?’ Of course, markets are not that simple, especially when they operate under different rules.

Germany’s Economy Minister Robert Habeck was discussing the fear German manufacturers have of calling out the Chinese car market in 2023.

Speaking in regard to the anti-subsidy investigation, he said:

‘German cars are sold well in China. Now Ursula von der Leyen proposed that we should have a deep dive into the question if China is giving illegal, or not WTO-[compliant] subsidies to its producers of electric vehicles.’

Yes, they should be investigated. Flouting WTO rules after never meeting the behavioural requirements to properly join the WTO, is one of the reasons China has been able to disrupt global trading standards to the detriment of rule-abiding nations.

‘The German automotive industry is afraid, rightly so.’ He added, ‘For France, it is not a problem, because they’re not selling so many cars [into China].’

These factory closures, a year later, should serve as proof to the German government that turning a blind eye to China’s suspected rule-bending is not going to save the manufacturing industry long term. If anything, it keeps German manufacturers limping into the arms of Beijing instead of forcing Beijing to compete in a global, rules-based market.

The WTO is ultimately about stopping governments from abusing workers.

Europe preferred the French position of addressing Chinese market interference, so Mr Scholz went to China to plead with officials to engage in fair competition. You can guess Xi Jinping’s response.

Mr Scholz should have taken the American position, which saw China slapped with a huge increase in tariffs. As of May 2024, Biden’s position was 100 per cent tariff on all Chinese electric vehicles. Tariffs were also raised on lithium batteries, natural graphite, magnets, and semiconductors.

‘I’m determined that the future of electric vehicles be made in America by union workers. Period,’ said President Joe Biden, building on Donald Trump’s tariffs following a review.

Just to make sure German manufacturers die a swift death, European nations are withdrawing electric vehicle subsidies right when the cost of production is at its highest.

Having corrupted the market, falsified demand, created an unrealistic price expectation for consumers on the back of public handouts, and refused to stop China using slave-like labour and dodgy environmental practices to compete – the EU is feigning ignorance at the collapse of the German car industry.

With German car manufacturers selling into China, any move to protect manufacturing by raising the costs on Chinese products will see retaliation.

Ralf Brandstätte, Volkswagen’s brand CEO for the Chinese market, made some comments which highlight a major market and product split which makes it impossible to create the same product for Western and Asian markets.

In discussing the way young Asians treat their electric vehicles, he said:

‘It’s not only to go from A to B, they live in their car as additional living space. They spend time there with friends. They spend time there with families. And they are … highly tech savvy. [They are] using their mobile phones five hours per day and they want to have the same digital connectivity with their cars. So we will deliver these Chinese “wow” effects that Chinese customers expect.’

That’s all well and good, but Volkswagen won’t be able to sell those cars into Western markets. Australia has made it illegal to interact with phones or tablet devices inside cars – although law enforcement have been woefully unclear how this relates to phone-based SatNav and Tesla’s tablet-based electric vehicles.

The pursuit of safety, championed by Europe, means that unless there is a complete change of direction from government, AI cars designed to engross users with interactive tech are not feasible.

Unsurprisingly, Volkswagen has started investing billions of euros into Chinese manufacturing while partnering with Chinese EV makers for its 2026 launch. China is forcing these cars to be made faster and cheaper – and we all know where that line of thinking ends. At some point we will stop and ask, are these cars even German? What value does a German brand have if it is made in a Chinese factory? These companies are famous for their workmanship. That will be lost at which point there will be no reason for a customer to choose a German car over a Chinese car. They will pick the cheapest one.

Some of this irresponsible interference by Europe’s political bureaucracy might have been survived, except for the control of the unions. They are the cement which stops industry from adapting and surviving. Just as the union movement sealed the death of manufacturing in Australia, they are doing it in Germany – demanding pay rise and job protection for industries that must cut costs or close.

‘We won’t go along with plant closings!’ Insisted the chair of a company that represents workers’ rights.

Oh really? What are they going to do, cough up their own capital to keep the lights on?

Volkswagen already has an operating plant in Xinjiang – yes, that Xinjiang. Where does that leave German workers?

‘If Volkswagen confirms its dystopian path on Wednesday, the board must expect the corresponding consequences on our part,’ said the lead negotiator for IG Metall on Monday.

Alright Thorsten, but your time would be much better spent protesting outside the EU headquarters or at the upcoming COP conference – they are the source of your woes.