Economania

The automotive sector remains a crucial employer across Europe and the UK. Indeed the prosperity of many European countries and nations elsewhere can be gauged by the success of their respective industries. However the sector has become more competitive than ever before over falls in sales in several markets, notably China. The move to all electric vehicles has also demanded investment at a time of parallel stresses on available resources.

It is now six months since Volkswagen agreed a deal hammered out over the negotiating table with unions not to close any manufacturing plant but cut 35000 jobs within Germany to reduce costs. This has been caused by a fall in overseas sales hitting production levels. It was also expecting its staff to take a cut in wages of 10%. The redundancies will be achieved by 2030 through such measures as offering early retirement to more senior staff. A wage increase of 5% will be suspended next year and into 2027. The number of apprenticeships will be cut to 600 a year from 2026 too. This has sent shockwaves across Germany where the automotive sector was perceived to be the symbol of German export success and a beacon of the country’s prowess in high technology. Other German car manufacturers such as BMW are also grappling with the same issues.

Neither is it just European car manufacturers that are struggling. Nissan has announced that it is cutting 11000 jobs and will shut seven factories. This has been caused by falling sales in China and heavy discounting in the USA that has impacted on sales and profits. This brings the total of staff being laid off by Nissan in the past 12 months to 20000 persons. A proposed merger between Nissan and Honda also collapsed after talks were perceived to be going nowhere. This could have created a motor industry giant worth £46 billion and fourth in the world behind Toyota, Hyundai and Volkswagen. New concern has arisen over what might happen to the Nissan plant in Sunderland that employs 6000 staff. Given the fact that the UK remains the 2nd biggest market in Europe for new registrations, Nissan could regret leaving. Also the UK acts as a springboard for exports to Europe even after Brexit.

Nissan has also divulged that it might be open to sharing capacity at its plants around the world with its partner Dongfeng, a Chinese state owned vehicle manufacturer. Free and fair competition does not exist when a private owned company is competing with a state owned entity in the same market, be it China or elsewhere, and the state owned company can never go bankrupt. It would not take an MBA to work that this is never a level playing field for all parties. This amounts to a total mockery and no doubt represents the tip of the iceberg. It is probably a miracle that China has not been shoved in the dock at the WTO over this protectionist practice and other abuses. Many would claim that this is no more than what the Chinese deserve.

Within the UK, output of vehicles has fallen to a 70 year low according to figures released in May by the Society of Motor Manufacturers and Traders. This reflects the ongoing shift to electric vehicles from petrol driven vehicles. The Easter holiday also fell in April 2025 also reducing working days. Production for export has also fallen and this has been the biggest drag on the sector. Few readers realise that 70% of cars made in the UK will go abroad for export. This is a good thing but when the trading environment deteriorates under any pretext or cause, it becomes a two edged sword. This also has ramifications for jobs and investment within the industry if exports do not recover.

Brazilian authorities have begun a prosecution and claim for damages against three companies including the Chinese car manufacturer BYD over horrendous working conditions at a construction site in the north east of the country. 220 Chinese staff were rescued and saved from appalling work conditions. An investigation was started after an anonymous complaint. Staff were living in substandard accommodation and sleeping on beds without mattresses. One toilet on site was shared by 31 persons. Construction site staff had their passports confiscated and were working under illegal employment contracts including exhausting hours and no regular rest period at all. Prosecutors also alleged that the staff had 70% of their pay withheld and faced a high cost if they ever attempted to terminate their contracts. Under Brazilian law, modern slavery is defined as degrading work that entails a debt bondage.

The Public Prosecutors Office is now seeking damages amounting to 257 million Brazilian reals or £33million equivalent in UK currency. The factory was being built at the city of Camacari in the north east of Brazil in the state of Bahia. This plant has now been halted completely. It was intended to be operational by now and was intended to be BYD’s first plant outside the Asian continent. BYD is not the only company involved in this scandal. This can leave no doubt amongst anyone regardless of beliefs or ideology as to how the Chinese behave towards their own people abroad. As to how they would treat the indigenous staff in a Chinese owned plant, well this does not bear thinking about. At least someone somewhere was prepared to stand up and also go in and knock heads together. The government in the UK might do well to remember this episode the next time that it goes cap in hand determined to attract more inward investment from China.

Volvo Cars based in Sweden is also cutting 3000 jobs in cost cutting measures. This has been caused by slower sales in Europe and the 25% tariff imposed on imports of vehicles into the United States by Donald Trump.The firm was sold by Ford to another Chinese motor manufacturer Geely Group who are probably state owned. That says it all in a nutshell. European staff in a private company pay the price of sector re-structuring while the Chinese staff keep their jobs. Again this is demonstrative of there not being a level playing field.

(see www.bbc.co.uk/news/business)

Mark Sandford - Permission granted to freely distribute this article for non-commercial purposes if attributed to Mark Sandford, unedited and copied in full, including this notice.

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