Volkswagen Is Not Alone, The Problem Of Factory Capacity Hits A Number Of European Automotive Giants

JAKARTA - The automotive industry is currently very competitive, especially with the emergence of many Chinese electric car manufacturers. A number of Western manufacturers have to compete at lower prices, but high production costs make it difficult for them.

The current crisis that Volkswagen (VW) is facing, for example, has graced a number of Western media reports in the past two weeks.

What VW is currently facing is also experienced by a number of large manufacturers in Europe where not only VWs are facing problems with overcapacity of factories.

Based on a Reuters report, September 25, which traced the automaker utilization data across Europe, six well-known automakers showed similar trends. The surprising fact that VW is said to be in better condition than its competitors.

By looking at the factory utilities data, it can be seen whether the factory operates efficiently or not.

French auto giant Renault and merger company Fiat Chrysler Automobiles (FCA) and PSA Peugeot Citroen, Stellantis, have lower average factory utilizations in Europe than VW.

The data was collected by GlobalData for Reuters, and also includes other automakers such as BMW, Ford, and Mercedes-Benz.

Reuters is also collecting data for all automakers in Europe's eight major automaker countries. The data is divided into two groups: a country with high production costs (Germany, France, Italy, and the UK) and a country with low production costs (Czech Republic, Slovakia, Spain, and Turkey).

The results show a clear trend, namely the higher factory utilization in Central and Eastern Europe which has lower production costs. This indicates that the main problems faced by most European car manufacturers lie in their own country of origin.

Overall, European car manufacturer utilization for light vehicles such as passenger cars fell to 60 percent in 2023, compared to 70 percent in 2019. In countries with low production costs, the average utilization fell slightly to 79 percent from 83 percent. Meanwhile, in countries with high production costs, factory utilization fell drastically to only 54 percent from 65 percent.

According to GlobalData, the utilization rate of around 70 percent is considered a minimum to achieve profitability, depending on the type of vehicle. Meanwhile, utilization of 80-90 percent is considered a cost-effective level, and allows flexibility for model change and maintenance. With this data, it can be seen that the problem of overcapacity of the plant and the high cost of production is not only faced by Volkswagen. This is a challenge faced by most European automakers, especially in countries with high production costs.

Unfortunately, Volkswagen, Stellantis and Mercedes-Benz declined to comment on this Reuters findings. Renault said it used different benchmarks that showed higher numbers for its factories. BMW also said the data may not be on the actual level.