This news came through my Twitter feed today and I would suggest it is more than a rumor and is already being negotiated. We know the recent news coming out of VW has not been exactly positive and the 2nd biggest car manufacturer is in deep trouble. Turning to the Chinese for help tells you how bad things really are and this is a reality check.
Remember when COVID first appeared countries were warned about Chinese buying up household names. Merkel went as far as stating German auto brands were safe and off the table yet Mercedes has now got a 10% Chinese partner. The world has given in and the last thing any country should be doing is giving up it's manufacturing industry. Japan has done the exact opposite and paid for all the Japanese companies to pull out of China and bring manufacturing home. This is what every country should have been doing all along as it is no longer true to say China has cheap manufacturing and is a complete fallacy. The truth is they have no competition because everyone else stopped producing.
When you look deeper even though this news is shocking VW are entrenched with the Chinese more than we can imagine. VW has been working closely with the Chinese for 40 years and has 39 manufacturing and assembly plants in China employing 90 000 workers. The number of employees in Germany under the VW umbrella (Porsche, Audi and VW) is in the region of 300K and is the largest German employer. What happens if the Chinese take over production and will those workers jobs be safe?
This is not a done deal yet and the German government needs to approve this as VW is one of their key brands. My head tells me this is really bad for VW as would anyone support team knowing they are now made by the Chinese under a German flag. The brand will take a hefty knock that I believe will be the downfall and breaking up of the VW Group.
There could be a number of scenarios to consider with the main one being VW leasing manufacturing and assembly plants in Germany to the Chinese EV car industry. This would save costs for VW and keep their employees active as the production numbers decline. This would be seen as a positive on one side, but also a very big negative as VW would still own the infrastructure, but for how long.
One can understand why China would like these facilities as having a Chinese car manufactured in Europe bypasses the new tariffs that are going to be introduced with CBAM in January 2026. This would be a smart move, but how can Europe allow this to happen as it sets a precedent that will ultimately be their downfall. The tariffs are being put in place to protect the EU manufacturers and I would go one step further by helping subsidize local prices against the competition. This is going to be a trade war with the EU rightly protecting themselves from the onslaught of countries with no carbon emission controls in place. Going green is not cheap and if the EU allows China in via the back door they are done for good.
The German workers unions will have plenty to say and choosing the wrong option could easily see a government change. The EU in general is considered weak or should I say lost their common sense by the rest of the world and whichever way Germany goes with this will make or break the EU. Personally I don't think they have any choice, but to flat out reject this and should concentrate on being more efficient in their production costs. The leftist thinking is a worry and the people only have themselves to blame for re electing officials who are more worried about climate change than the reality facing them head on. In this case the climate change CBAM regulations should work in their favor as long as they uphold them and use them to protect the EU businesses. The big problem again here is how little is manufactured locally and the EU is reliant on China for many products.
The good part about this is if the Chinese do get the approval to manufacture in Europe we are talking years before they are established. Once that happens if it does then the decline of Germany and the companies we all know will be rapid.
