US Car Company Trouble As VW Lays Off 100,000

Here is a huge layoff, not because of AI. VW is closing four plants, cutting back on models, and laying off 100,000 people. What is the primary reason? Among them is the fact that the Chinese are rushing into their markets with inexpensive EVs. VW and other legacy car companies can’t compete with these. Close to 10% of cars sold in Europe are from China-owned companies.

Chinese EV giant BYD is building factories in the region to get closer to its markets. One will be in Szeged, Hungary. The company says it is exploring Spain as a location. Europe may fear the cars, but the factories could employ thousands.

The EU has erected tariff walls against the Chinese car companies. Many of the BYD cars sold in Europe are plug-in hybrids, which makes the need for charging stations less essential and the Chinese cars more attractive.

In all likelihood, Europe also has the same problem as the US. As new cars become very expensive, people opt for used cars or hold on to their current cars for years. In the US, the average age of a car on the road is 12 years. If this figure remains where it is or grows, the threat to new car companies in the UK, EU, and US will be significant and widespread.

The US can dodge the China EV invasion with its high tariff laws. This means GM (NYSE: GM | GM Price Prediction) and Ford (NYSE: F) can rest easy. But how long until US consumers clamor for much less expensive cars? There is every indication that these Chinese cars are well made and fully featured. How long before a large trade deal with China lets their EVs in? There is no way to make that calculation.

Ford CEO Jim Farley said that Chinese cars could “put us all out of business”. Is that so or not? One can only guess. But VW’s fate is a warning. The car industry is changing, and for Western manufacturers, not for the better.