German car companies on the verge of collapse, what does it mean for the Czech economy?
It has long been talked about, but many hoped that it would eventually be avoided. But now the reality is inevitable. The German car companies are facing serious problems, which is negatively affecting not only the German economy, but also the Czech economy. According to some experts, the impact on the economy could be worse than originally expected.
Problems with sales and margins
The latest car company to announce problems is Mercedes-Benz. The company has seen lower than expected sales of its vehicles. In the past month, the number of new Mercedes-Benz vehicles registered in the European Union fell by 13%. The situation is also serious in China, where the carmaker faces not only a slowing economy but also increasing competition that is likely to worsen further. “Overall, we expect a similar development in the second half of 2024 as in the first half, which is a less optimistic outlook than we had originally planned,” Mercedes-Benz said, according to the WSJ. Another complication is shrinking margins.
Volkswagen is in even more trouble, with declining sales and, above all, a failure to sell the electric vehicles on which it has staked its future. According to the latest reports, the company plans to lay off up to 30 000 employees, as reported by Euronews. The situation is also not favourable for the Czech Republic, where Volkswagen owns Skoda Auto, which is also struggling with falling sales.
The consequences will affect everyone
Volkswagen is also considering closing some plants in Germany, which would be completely unprecedented. The Wolfsburg plant, for example, is now producing at just half its capacity, which is unsustainable in the long term.
The third major car company to report a worsening outlook is BMW. The company is also facing falling sales in China, where competition is growing. In addition, BMW is dealing with problems with the braking system from supplier Continental, which is fitted to 1.5 million cars. Fixing the glitch will cost billions of euros, putting a significant strain on the company’s budget, according to CNBC.
The impact on the Czech Republic will be significant. In addition to the fact that the problems will affect Škoda Auto directly, it should be remembered that the Czech economy is heavily dependent on subcontracting to German car companies. If their sales fall dramatically, demand for Czech components will also fall, which could lead to redundancies.
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