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the traditional automobile manufacturing industry is facing challenges.

recently, the german volkswagen group announced that it is considering closing "at least" one larger domestic automobile manufacturing plant and one domestic parts plant, and will terminate the employment protection agreement implemented since 1994. if this plan is finally implemented, it will be the first time in the 87-year history of the volkswagen group that a factory in germany will be closed.

as a long-established industrial country, the automobile industry has always been one of the supporting forces of the german economy. but now, huge changes are quietly taking place in the german automobile industry.

the automobile industry is not only important in germany, but also in japan. china is one of japan's important overseas markets. currently, the japanese car market in china is in a state of contraction.hondait is planned to close the fourth production line of gac honda with an annual production capacity of 50,000 units and the second production line of dongfeng honda with an annual production capacity of 240,000 units. after the adjustment, honda's total automobile production capacity in china will be reduced from 1.49 million units to 1.2 million units.

at present, the traditional automobile industry is generally facing multiple challenges such as declining sales and profits, difficulties in electrification transformation, declining competitiveness in the international market, and supply chain crises.

how will the former automobile manufacturing giant complete its transformation through adjustment?

volkswagen makes changes to its "headquarters"

germany's volkswagen ag has decided to close "at least" one of its larger domestic car plants and a local parts factory, ending an agreement with unions to protect jobs.

the core clause of the agreement, which dates back to 1994, provides workers at six german factories with protection from being fired at the company's unilateral initiative. originally, the agreement was to extend to 2029, providing workers with long-term job security. but with the termination of the agreement, this protection will only last until mid-2025. after that, volkswagen's promised factory closures and layoffs are expected to be officially implemented.

image source: volkswagen

on september 4, local time, when tens of thousands of volkswagen workers, union representatives and volkswagen executives attended a staff meeting at the wolfsburg headquarters, some workers held up signs and shouted "we are volkswagen, and you are not." on september 12, volkswagen's labor-management committee said in a statement that volkswagen group and ig metall, germany's most powerful trade union, will start negotiations on september 25.

volkswagen's works council said the group dealt an "unprecedented blow" to labor agreements earlier this week by cancelling decades-old job guarantees at six plants. ig metall had previously pledged to resist any layoffs and plant closures and warned that strikes were theoretically possible from the end of november.

in the first half of this year, volkswagen group's revenue reached 158.8 billion euros, a year-on-year increase of 1.6%, but its operating profit was about 10.1 billion euros, a year-on-year decrease of 11.4%. at the same time, global sales were about 4.35 million vehicles, slightly lower than the 4.37 million vehicles in the same period last year. as the main force of volkswagen group, the profit margin of volkswagen brand in 2023 is 3.8%, which will drop to 2.3% in the first half of 2024.

volkswagen expects to sell about 14 million cars a year in europe in the future and does not expect annual car sales to return to the 2019 level of 16 million, leaving the company facing a demand gap of about 500,000 cars, equivalent to the production capacity of two factories.

at the same time, volkswagen group's market size in china is also shrinking. in the first half of this year, volkswagen's sales in the chinese market were 1.345 million vehicles, a year-on-year decrease of 7.4%. its market share dropped from nearly 40% at its peak to 30.9%, while its profit in the chinese market was 801 million euros, a year-on-year decrease of 30%.

blume, chairman of the volkswagen group's board of management, said the environment has become more severe and germany is gradually falling behind in competitiveness. "we must now step up our efforts to create the conditions for long-term success." blume said at the earnings conference in early august that volkswagen's main action at this stage is to cut costs. he specifically mentioned cutting costs in factories, supply chains and labor. "we have completed all the necessary organizational steps. the question now is cost, cost and cost."

under the pressure of cost reduction and transformation, layoffs are inevitable. volkswagen's latest financial report data shows that the company has nearly 683,000 employees worldwide, including about 295,000 in germany.

in fact, the transformation shock of the traditional automobile manufacturing industry has affected many automakers. in august this year, general motors planned to lay off more than 1,000 salaried employees worldwide due to cost cutting after a streamlined assessment of its "software and service department".

also in august, news of layoffs came out about stellantis, the world's fourth-largest automaker. public reports show that the company is considering cutting more than 1,200 engineering positions in europe and the united states, and plans to offer a new round of voluntary buyout plans to salaried employees in the united states to cope with the challenges brought about by declining profits and electrification transformation.

many automakers adjust their chinese operations

today, china is a pioneer in the transformation of automobile electrification and intelligence, which has also brought significant impacts to the traditional automobile manufacturing industry. against this background, the sales decline trend of joint venture brands has become increasingly obvious, and correspondingly, there is excess production capacity.

honda motor is making a series of strategic adjustments in china. in order to reduce inventory, honda's three factories have suspended production for about two weeks since august 26.

image source: honda china

according to honda china's official information, honda has seven complete vehicle production lines in china, with a total annual production capacity of 1.49 million vehicles. gac honda plans to shut down the fourth production line with an annual production capacity of 50,000 vehicles in october 2024, and dongfeng honda plans to shut down the second production line with an annual production capacity of 240,000 vehicles in november 2024. after the adjustment, honda's total automobile production capacity in china has increased from 1.49 million vehicles to 1.2 million vehicles.

data shows that in august this year, honda's sales in the chinese market were 56,900 vehicles, down 44.3% from the same period last year; in july, its sales in the chinese market were 52,600 vehicles, down 41.4% year-on-year. in the past two months, honda's sales in china have fallen by more than 40%.

honda has always been famous for the power performance and economy of its fuel vehicles. however, under the wave of electrification, these advantages no longer seem to be prominent.

at the same time,nissannissan motor also announced earlier that it would close its manufacturing plant in changzhou, jiangsu province, china. this decision marks the closure of the plant after less than four years of operation since it started production in 2020.

in 2018, nissan achieved its peak sales in china, with annual sales of 1.564 million vehicles, a year-on-year increase of 2.9%, surpassingtoyotain 2020, dongfeng nissan's changzhou plant officially started production, mainly producingqashqaisuv models. nissan's total production in china reached 1.6 million vehicles, and the annual production capacity of the changzhou plant was about 130,000 vehicles, accounting for 8% of its production. faced with market pressure and industry transformation, the company decided to transfer the production of the qashqai suv to the dalian plant.

how to transform?

in the transformation towards electrification and intelligence, the closure of traditional automobile manufacturing plants is inevitable, but in the long run, this is the only way for enterprises to transform and upgrade.

regarding the closure of some chinese factories, a honda spokesperson said that these adjustments are part of honda's response to changes in the chinese market. "we are accelerating the steady transition to electric vehicles and optimizing production capacity to achieve sustainable growth in our four-wheel vehicle business in china," said a honda spokesperson.

it is worth noting that honda is adjusting its layout in the chinese market rather than simply shrinking it. honda plans to build two new energy vehicle factories, one withgachonda aims to start production at the two new plants later this year, with an expected capacity of 1.44 million vehicles. the company also stressed that china, as the world's largest market, remains an important market for japanese automakers such as honda.

before announcing the closure of its german factory, volkswagen announced in april this year that it would invest 2.5 billion euros in china to further expand its production and innovation center in hefei to strengthen local research and development.xpeng motorsthe production of two jointly developed volkswagen brand smart electric models is also accelerating. "through the hefei production and innovation center, the speed at which new technologies come to market will increase by about 30%. the continued investment in the center reflects the group's determination to rapidly strengthen local innovation capabilities," said bared, chairman and ceo of volkswagen group (china).

it is worth noting that according to the "guidelines for manufacturing talent development planning" issued by the ministry of industry and information technology, it is predicted that by 2025, the total demand for talents in the energy-saving and new energy vehicle industry will be 1.2 million, and the talent gap will be as high as 1.03 million.

on the one hand, the traditional automobile manufacturing industry is closing factories and laying off employees, while on the other hand, new factories and new cooperation models are attracting new talents. these common scenes during industrial transformation periods may continue for several years during the transformation of the automobile industry.