Germany is bracing for a major electric vehicle shock
When Dirk Kosbad started working at the Volkswagen plant in
Zwickau in 1990, his job was to assemble the Trabant, East Germany’s signature
car, by hand. Now, over 30 years later, he works in the same factory as a shift
supervisor: watching over orange robots gliding swiftly around a silver car
frame, shooting tiny bolts of lighting here and there, welding together the
various parts that will soon enclose a large rectangular battery. Zwickau is
the nucleus for Volkswagen’s shift to electric mobility.
After over a century of unrivalled power, the internal
combustion engine has had its day. The list of countries planning bans on the
sale of combustion-engine cars is growing: Norway’s phase-out is scheduled for
2025, followed by the UK in 2030, and the European Union’s 27 member states in
2035. Europe’s mighty automotive industry, and its 3.7 million manufacturing
jobs, finds itself in the middle of a perfect storm. Digitisation, automation
and the public’s awakening to the severity of the climate crisis herald nothing
short of a revolution. Some people see this as an opportunity. Others, fearing
the worst, have started talking of Europe’s car manufacturing heartlands
turning into a constellation of mini Detroits.
In recent years car manufacturers have been forced to invest
billions of euros in the development of greener machines. In Zwickau, the transition
has already happened. Starting in 2019, Volkswagen retrained its 8,500
employees on site and remodelled the entire production line to exclusively
build electric cars. “In the beginning we were pretty scared,” says Kosbad, 57.
“No one could have imagined that it would be a success story. Everyone here was
sceptical.” But Volkswagen’s gambit appears to have paid off: demand for
electric vehicles has soared, with new car registrations in Germany almost
doubling from 2018 to 2019 and more than tripling from 2019 to 2020. While the
365,000 electric cars registered are just a tiny sliver of Germany’s overall 48
million, the growth is exponential: the number of electric vehicle
registrations in the first four months of 2021 was three times the entire 2020
amount. Volkswagen, which is Germany’s largest carmaker, is now only second
behind Tesla in global electric vehicles sales. Now, initial scepticism among
the employees in Zwickau has given way to cautious optimism, Kosbad says. Those
who previously assembled exhaust systems are laying cables for the battery
engines; some retrained as high voltage technicians. You need fewer workers to
make an electric car, but Volkswagen solved this problem by increasing its
output – hence selling more than ever and laying off no one, at least for now.
But not everyone has Volkswagen’s billions. The backbone of
Europe’s car industry is made up by about 10,000 small and medium-sized part
suppliers – 1,200 of them in Germany alone. These companies make components
like fuel tanks, gearboxes or exhaust systems, and collectively employ 1.7
million people across the EU27, compared to the big car brands’ 1.2 million,
according to data by CLEPA, a car supplier trade association. Their entire
product portfolio is doomed to become obsolete in an electrified future, but
most of them don’t have the funds to reinvent their business overnight – which
means that thousands of jobs are at risk.
Cars are Germany’s most important export, with sales
totalling around €300 billion annually. Almost five per cent of all domestic
jobs are directly linked to the automotive industry. “We have just under a
million employees in the car industry in Germany. We assume that around 200,000
of them are acutely endangered, most of them from automotive suppliers,” says
Wolfgang Lemb, chairman of IG Metall, Germany’s largest trade union. A recent
report by the Boston Consulting Group predicted that a staggering 42 per cent
of jobs will be lost in “internal combustion engine-focussed suppliers” across
Europe between now and 2030 – that, according the firm’s calculations, will
result in 280,000 people out of work.
In the face of this challenge, even big players are
struggling to outmanoeuvre industrial oblivion. Last year, the board of one of
the world’s largest automotive suppliers, ZF Friedrichshafen, which specialises
in drive technologies, shocked its workers by announcing that up to 15,000 jobs
would have to be cut. Half of the company’s business was reliant on combustion
engines, and the swift transition to electric compounded by the slump in sales
during the pandemic boded ill for car-part makers. To survive the crisis, ZF
created its own retraining facility for 30,000 employees and acquired several
smaller companies, broadening its portfolio to include autonomous driving and
wind energy. A spokesperson says that owing to those measures, ZF managed to
cut its reliance on combustion engines down to 27 per cent. Although 6,000
workers have left the company since the 2020 announcement – many of them
accepting early retirement offers – and more cuts might follow, the
spokesperson says that ZF is now in a better position than it was just a few
years ago.
Other companies seem to be waiting for the inevitable. Take
Selzer, a manufacturer of metal parts. The former family-run business – nestled
in Germany’s hilly rural west, a 90-minute drive from Frankfurt – has been producing
components for motors, brakes and gearboxes for almost 100 years. For 41 of
those years, Sybille Brandenburger has been part of that story. She started in
the pressroom, punching, bending and assembling metal components for gearboxes
when she was 16. Now 57, she’s been shop chairwoman for 25 years. More than 80
per cent of Selzer’s business is directly dependent on combustion engine
manufacturing, and the transition to electric has hit the business severely.
Since 2018, more than half of the workforce has been made redundant due to
drops in turnover. In 2020, the company stopped all its apprenticeships,
effectively deciding against investing in its future. Brandenburger says she’s
never experienced anything like it in her four decades in the business. “People
tell me they can’t cope with the situation,” she says. “Some have had their
second or third child or just bought a house, some are too old to start afresh.
We’re all afraid that one morning we arrive at work and the gates are shut.”
Many small and medium-sized companies across Europe are
similarly unprepared. An IG Metall survey of 2,000 European businesses,
employing over 1.7 million people, found that almost half had no or no
sufficient strategy to face down the challenge. Lemb partly blames major car
brands for the crisis: he says that throughout the last 20 years, car
manufacturers strong-armed smaller companies into repeatedly lowering their
prices, thus depriving them of precious resources and stifling any potential
for upgrading.
According to Judith Kirton-Darling, deputy general secretary
of IndustriAll Europe, a European trade union federation, the EU’s proposal to
ban the sale of internal combustion engines by 2035 has to be accompanied by a
policy framework that rises to the enormous task ahead. The shift, she says, is
too big for companies to navigate alone. “This is the biggest industrial
revolution in more than a century. It is a colossal economic change, which is
coming,” Kirton-Darling says. She likens the impending crisis to the decline of
northern England’s heavy industry and Detroit’s car industry. And if the
situation is not managed properly then the continent might soon face its very
own Brexit or Trump-esque shocks. “When there’s a lot of structural change, you
create a lot of uncertainty for people. And there are political consequences of
that because there are those who are waiting to exploit social anxiety.”
In Germany, the notorious Mittelstand – the country’s
bedrock of successful small and medium-sized businesses – is often described as
the heart of its prosperity, and rightly so. It makes up the lion’s share of
the German economy and accounts for more than half of all domestic employment.
Right now, many of these companies, like Selzer, are flailing, as despondent
employees fret about whether their paymaster will make it through the decade.
Many Selzer workers are already looking elsewhere, but Brandenburger says she’s
not willing to give up hope just yet. “Sometimes I find myself counting the
years until I can retire, wishing I wouldn’t have to go through this,” she
says. “But then I stop myself. This is my lifetime. It’s precious and I’m not
going to wish one day away.”
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