Bloomberg, citing a report from consulting firm AlixPartners, stated that under the backdrop of weak demand in the European and American auto markets and the growing pressure from Chinese automakers such as BYD, 8 European auto plants may be forced to close in the future to avoid significant losses.
Restructuring consultants at AlixPartners noted that across the European continent, the current average capacity utilization rate of auto plants stands at only 55%. When the capacity utilization rate falls below three-quarters, corporate profits will come under severe pressure. AlixPartners believes that Stellantis Group is in the worst situation—this automaker, which owns the Alfa Romeo brand, has a capacity utilization rate of merely 45% at its European plants.
Fabian Piontek, Managing Director of AlixPartners Germany, said, “In the next few years, European automakers will lose 1 million to 2 million units of sales volume to Chinese brands. Chinese automakers are expected to capture approximately 5% of the European market share by 2025.”
Closing a plant is not only costly but also requires lengthy negotiations with powerful labor organizations. According to AlixPartners’ estimates, shutting down a large-scale plant with around 10,000 employees will incur costs of approximately 1.5 billion euros (1.7 billion U.S. dollars), and the entire process will take 1 to 3 years.
After decades of growth, European automakers are implementing large-scale layoffs and cutting production capacity, as demand has failed to recover to pre-pandemic levels. In October this year, Volkswagen Group temporarily closed its Zwickau plant in Germany for one week, while Stellantis also suspended production lines for models such as the Fiat Panda and Alfa Romeo Tonale.
▲ Although European new car sales seem stable, they have not yet returned to pre-pandemic levels.
Data from the European Automobile Manufacturers Association (ACEA) shows that European car deliveries in 2024 only rose slightly by 0.9% to approximately 13 million units. AlixPartners pointed out that Chinese brands such as BYD and SAIC MG may capture 10% of the European auto market share by 2030, which will intensify the pressure on European auto plants to cut production capacity.
AlixPartners’ research also indicates that auto plants typically need an annual production volume of over 250,000 units to achieve profitability. If Chinese manufacturers reach an annual sales volume of 2 million units in Europe by 2030, it will mean that Europe will have excess production capacity equivalent to approximately 8 additional auto plants. In most European countries, fully shutting down plants is fraught with difficulties. In the supervisory boards of German companies such as Volkswagen and Mercedes-Benz, labor representatives hold the power to veto relevant decisions.
In 2024, Volkswagen Group’s management spent several months negotiating a cost-saving agreement with labor leaders, but ultimately abandoned its plan to close a plant in Germany for the first time. The finalized agreement included production capacity cuts and the layoff of 35,000 employees.
Tom Gellrich, Managing Director of AlixPartners, emphasized, “This is a lengthy process. Management needs to prove to all parties that closing the plant is the only viable business option.”
(Reprinted from https://news.eccn.com/）