Automakers Thrived in the Pandemic. Many Are Now Struggling.
A few years ago, automakers were celebrating record profits as the pandemic created shortages of new cars, allowing them to raise prices. Now, the hangover is setting in.
Nissan, the Japanese automaker, is laying off 9,000 employees. Volkswagen is considering closing factories in Germany for the first time. The chief executive of the U.S. and European automaker Stellantis, which owns Jeep, Peugeot, Fiat, and other brands, has quit after sales tumbled. Even luxury brands like BMW and Mercedes-Benz are struggling.
Each carmaker has its own problems, but there are some common threads. They include a tricky and expensive technological transition, political turmoil, rising protectionism, and the emergence of a new class of fast-growing Chinese carmakers.
Many of these problems have been apparent for years but became less pressing during the pandemic, lulling some automakers into complacency. When shortages of semiconductors and other components slowed production and limited inventory, carmakers found it easy to raise prices. But that era is over, and the industry has reverted to its pre-pandemic state, with too many carmakers chasing too few buyers.
Workers are among the first to suffer in an industry that employs nine million people worldwide in manufacturing, including around a million in the United States. More than two million Americans work for dealers and related businesses.
Ford last month announced 4,000 job cuts, mostly at factories in Britain and Germany, citing “unprecedented competitive, regulatory, and economic headwinds.” The company was partly referring to Chinese carmakers, which have charged into the international market with cars that can match Japanese, European, or American vehicles on quality, at much lower prices.
Competition from China is “starting to hit the safe places that Western carmakers had,” said Felipe Munoz, global analyst at JATO Dynamics, a research firm.
The rise of Chinese automakers has been particularly tough on German carmakers. Volkswagen gets one-third of its sales from China and once dominated that market. But the company’s deliveries there plummeted 10 percent in the first nine months of this year, compared with 2023.
BMW and Mercedes-Benz have also reported big sales declines in China recently, which they blamed for lower profits.
American carmakers have also suffered from this shift. G.M. said this month that it would take a more than $5 billion hit to its profit as it restructured its Chinese operations, which have been losing money.
Companies that were slow to replace aging models are doing worst. That has been the case for Nissan, Stellantis, and even Tesla, which analysts expect to end the year with sales that are roughly unchanged from 2023. Others have struggled to build appealing electric vehicles and develop software, an increasingly important element of car design.
Volkswagen was among the first established carmakers to develop electric vehicles, but the models underwhelmed buyers and critics. Sales in the United States of the company’s ID.4 sport-utility vehicle plummeted by more than half in the third quarter from a year earlier, according to Kelley Blue Book. Buggy software handicapped sales of the ID.4 and other electric models that Volkswagen sells in Europe and Asia.
“The Chinese are winning market share and the Germans are losing,” said Ferdinand Dudenhöffer, director of the Center for Automotive Research in Bochum, Germany. “It’s not only the electric cars, it’s the software in the cars.”
