Mercedes also in trouble, next week’s summit meeting on the German car industry

This article was last updated on September 20, 2024

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Mercedes also in trouble, next week’s summit meeting on the German car industry

Concerns about the German car industry are increasing by the day. In addition to the malaise at Volkswagen, Mercedes-Benz is now also in the corner where the blows are falling. The car manufacturer warned yesterday for the second time in a few months that profits this year will be lower than expected.

Minister Habeck of Economic Affairs has organized an emergency meeting in Berlin on Monday about the problems in the car industry. At the car summit, in addition to car manufacturers, he also wants to find a solution with suppliers and unions on how to pull one of the crown jewels of the German economy out of the doldrums.

Whether or not coincidentally, Habeck visited a Volkswagen factory in Emden this morning. There is great unrest there, because Volkswagen recently… massive reorganization has announced.

The Wolfsburg company, which also owns the Audi, Skoda and Seat brands, employs almost 300,000 people domestically and is even considering closing factories. During the minister’s visit, union members held up posters with slogans such as: “All locations must remain open”.

Competition from China

Confidence in the traditionally solid German cars suffered a blow almost ten years ago tampering diesels. The malaise at Volkswagen then worsened due to the sales dip during the corona crisis, followed by fierce competition from electric cars from China. At the same time, Volkswagen sales in China itself are declining.

Mercedes-Benz, another German automotive pride, has been hit by the same circumstances. Last night, the company again announced that net profit as a percentage of turnover (the so-called “return on sales”) will be lower this year.

In July, Mercedes-Benz already reduced this important indicator of profit, from 14 to 15 percent to 10 to 11 percent. Now, to the horror of shareholders, this has been further reduced to 7.5 to 8.5 percent. The Mercedes-Benz share price fell sharply this morning on the Frankfurt stock exchange.

Minister Habeck told the media yesterday that he was considering Volkswagen to come to the rescue with government support. But now that Mercedes-Benz is also in dire straits, ironically a Green minister must come up with a more comprehensive plan to keep the car industry afloat. On a visit to Emden, he mentioned tax benefits for electric company cars, for example.

Feasible card

The question is whether state aid and subsidies are feasible. In December, the government overnight pulled the plug on a generous subsidy scheme for the purchase of an electric car.

This was necessary to close an unexpected budget gap. Germany must also come up with a good story to get state aid approved by the European Commission. Due to the high risk of counteraction from China, Brussels must come up with a plan higher import taxes on cheap Chinese electric cars is also already weakening.

Habeck emphasized to Volkswagen employees that they should not expect miracles from him to keep the factories open: “Volkswagen really has to do most of this work itself.”