Car factories in Europe will soon begin to close

Car factories in Europe will soon begin to close

October 19, 2020 0 By autotimesnews

The auto industry is rarely reported by the media or academics, but its scale and global economy explain why the governments of the countries in which they are located consider it to be a major economic sector.

According to the European Association of Automotive Manufacturers (ACEA), there are 298 car assembly and engine factories in Europe. Of these, 142 produce passenger cars, 28 light commercial vehicles, 58 heavy vehicles, 58 buses and 71 assemble engines, some of which produce mixed products. Germany has the largest number of such enterprises – 42 plants, France – 31, and Italy – 23. Outside the EU, Russia has 31 plants, the UK has 30 and Turkey has 17.

An estimated 3.5 million people are employed in the auto industry in Europe, with data showing that in the EU this segment of industry accounts for 11% of all manufacturing jobs. If we add to these numbers those employed in retail trade and ancillary operations, then this figure rises to 13.8 million people employed directly or indirectly.

These factories have to work to their limit in order to be economically viable, which means that cars must continue to be produced no matter what happens, even if there are not enough customers. The terrible truth is that even before the coronavirus pandemic, there were too many factories. This is why there is always room for trade, and why many cars end up being registered by dealerships to be subsequently sold at a discount. Despite this, supply outstrips demand.

Why not close several factories? This age-old question is hampered mainly by the problems of manufacturers working for their own competitiveness rather than for the common good, and perhaps even more so by the importance of the industry. The job cuts in the auto industry are quickly on the radar of governments and trade unions, the former poised to offer incentives to bolster automakers, while the latter have enough clout in some countries to abandon any closure plans, regardless of economic logic.

In the foreseeable future, many enterprises will be forced to reduce their production capacity. The market will put a lot of pressure on production – and this time, governments will not be able to provide support and trade unions will not be able to justify their policies. It is possible that in the future several enterprises will nevertheless be closed.