German automakers are expected to face water shortages, as per the Ifo.
Volkswagen has decided to tighten its budget, potentially leading to plant closures in Germany for the first time. Oliver Falck, Head of the Ifo Center for Industrial Economics and New Technologies, told Reuters that while the transition to electric vehicles is challenging, he remains optimistic about Germany's automotive industry. He acknowledges that it will be a tough, lengthy period, but he believes they can weather it, although they may not regain their past market shares.
The company's announcement on Monday came with the revelation that fewer plants will be required as electric vehicles become more popular due to their simpler construction. Until now, both conventional and electric car production have been ongoing simultaneously with the phrase, "We're still milking the combustion engine, but we're building more electric cars at the same time."
However, demand for electric cars is currently dwindling, both domestically and internationally. Falck urges that structural change should not be delayed due to fear of unemployment. He emphasizes that technological advancements are global and progressing swiftly. "Putting on the brakes won't work," he says.
Competition from China is also intensifying, with the Chinese market showing a strong focus on software and car entertainment. Falck notes that the Chinese are more invested in a high-quality karaoke system than they are in the quality of the car's interior panels. This focus on software and entertainment has resulted in some market share losses for German manufacturers, who are now playing catch-up in these areas.
Other automakers might need to consider similar budget adjustments to remain competitive, given Volkswagen's budget tightening and plant closure possibilities. The shift towards electric vehicles is prompting a reevaluation of production strategies across the global automotive industry.
