Car Industry Woes

The car manufacturing industry is facing challenging times. Sales in many markets are flat or reduced. More brands are vying for the customer, notably an influx of Chinese brands into many markets. Many car makers are not structured to adapt quickly to changes taking place. A few examples. 

Nissan is cutting 6% of its workforce or 9,000 jobs as net revenue fell by over 90% over the last six months. It will increase cooperation with some other Japanese car makers and reduce lead times. It will also focus more on electric and hybrid models. 

Audi recently announced that operating profit was down nearly 70% so far this year. There were various reasons for that, not just the challenging market place but still a sobering result. 

Volkswagen announced profit was down 64% and wanted to close up to three plants in Germany, lay off workers and cut pay by at least 10%. It hasn't gone down well at all. 

As I see it, the pressure is mainly from a surging Chinese car industry. They are taking more of the global sales but the pie isn't getting larger to accommodate this. Chinese companies have been quick to change and improve when required. China's import tariffs aren't helpful while expecting no such obstructions when exporting. 

Another issue is that those car makers that went into China producing cars made good money. They are now being driven back by local manufacturers and with falling volume, profits there are much harder to come by. 

It doesn't take much to move from very profitable to loss making. A drop in volume with overheads mainly fixed and the red ink can soon follow. If tough decisions aren't made and acted on, there will be grave consequences for some car manufacturers