Volkswagen and the Crisis of the Automotive Industry in Europe
Volkswagen's recent action, with proposals to close up to three factories in Germany and the possible reduction of global wages by 10%, highlights a critical situation in the European automotive industry. Although expected, this measure reflects the challenge the sector is facing due to the passivity and lack of strategic response from European institutions. Volkswagen is taking drastic measures to ensure its profitability and competitiveness in the face of a global crisis in the sector. However, these cuts also expose a larger problem: the lack of supportive policies on the part of the European Union to maintain the competitiveness of its own companies in a challenging global market.
Europe's Inaction at a Key Competitiveness Moment
European passivity is perceived not only as a lack of response to the automotive sector, but as a reflection of an industrial policy that has lagged behind in a context of accelerating energy change. China, for example, has implemented extensive support programs for its automotive industry, focusing on innovations in electric vehicles and the production of strategic metals, such as rare earths. The energy transition in Europe, on the other hand, has included environmental constraints and penalties that could further harm local companies.
Starting January 1, 2025, Europe will impose fines on automakers that fail to meet certain emissions limits, a move that, without an adequate back-up plan, could exacerbate the financial problems of companies such as Volkswagen, Mercedes and Stellantis.
While environmental sustainability is paramount, these restrictions could be stifling the industry's ability to respond at a critical time.
Urgency of a Rescue and Competitiveness Plan
The automotive sector has historically been an economic pillar in Europe, generating employment and contributing significantly to the GDP of several countries in the region. However, without a change in approach that allows for greater competitiveness in a global environment, the industry could suffer irreparable losses. Instead of tariffs or restrictive measures against international competitors, a comprehensive plan is needed to boost the competitiveness of European companies at home and abroad.
A first step in this direction could be the removal or relaxation of certain restrictions, such as a ban on internal combustion engines from 2035, allowing a more gradual transition to more sustainable alternatives. It is also crucial to facilitate the exploitation of resources such as rare earths to ensure an adequate supply of key materials in the electric vehicle production chain.
Responsibility and Immediate Action by European Leaders
The outcry from Volkswagen and other key players in the sector represents an urgent wake-up call to the European institutions. European Commission President Ursula von der Leyen, along with other leaders, must take immediate action to prevent further deterioration of the automotive industry. It is time to convene an emergency summit, where key players in the sector can discuss and design an effective plan to rescue and support the industry. This plan should include not only investments, but also a clear support policy to maintain jobs and promote innovation.
The current scenario of uncertainty and tension in the negotiations between Volkswagen and the unions represents only the tip of the iceberg. If Europe fails to act, this crisis could spread to other economic sectors, generating a chain of negative effects that would seriously affect the European economy as a whole.
Technical aspect
Volkswagen (Ticker AT: VOW3.GE) has currently been unwinding a cycle closure initiated in 2020. Since March 2021 the company has been consistently losing value, down approximately -65.5%. Since August 6 the company has been moving in a range between €99.26 and its all-time low of €87.50. It is currently located in an area testing the lows and if it manages to sustain the value could move again to the 100 euros area to test possible perforations of the bearish channel. Given the evolution of the automotive company's drift, it will not be unusual to see a continuation of the channel towards lower prices if it pierces the current support. The downward pressure is relatively strong, even though the company is trying to remain in a price zone close to 90 euros per share. The checkpoint is fragmented because in August this year its strong zone was around 120 euros per share and the current POC is above 114 euros. The RSI is slightly oversold at 46.15%. We will have to see the factors related to the company to see if the RSI advances with more downward pressure or on the contrary corrects.
Ion Jauregui - ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
Europe's Inaction at a Key Competitiveness Moment
European passivity is perceived not only as a lack of response to the automotive sector, but as a reflection of an industrial policy that has lagged behind in a context of accelerating energy change. China, for example, has implemented extensive support programs for its automotive industry, focusing on innovations in electric vehicles and the production of strategic metals, such as rare earths. The energy transition in Europe, on the other hand, has included environmental constraints and penalties that could further harm local companies.
Starting January 1, 2025, Europe will impose fines on automakers that fail to meet certain emissions limits, a move that, without an adequate back-up plan, could exacerbate the financial problems of companies such as Volkswagen, Mercedes and Stellantis.
While environmental sustainability is paramount, these restrictions could be stifling the industry's ability to respond at a critical time.
Urgency of a Rescue and Competitiveness Plan
The automotive sector has historically been an economic pillar in Europe, generating employment and contributing significantly to the GDP of several countries in the region. However, without a change in approach that allows for greater competitiveness in a global environment, the industry could suffer irreparable losses. Instead of tariffs or restrictive measures against international competitors, a comprehensive plan is needed to boost the competitiveness of European companies at home and abroad.
A first step in this direction could be the removal or relaxation of certain restrictions, such as a ban on internal combustion engines from 2035, allowing a more gradual transition to more sustainable alternatives. It is also crucial to facilitate the exploitation of resources such as rare earths to ensure an adequate supply of key materials in the electric vehicle production chain.
Responsibility and Immediate Action by European Leaders
The outcry from Volkswagen and other key players in the sector represents an urgent wake-up call to the European institutions. European Commission President Ursula von der Leyen, along with other leaders, must take immediate action to prevent further deterioration of the automotive industry. It is time to convene an emergency summit, where key players in the sector can discuss and design an effective plan to rescue and support the industry. This plan should include not only investments, but also a clear support policy to maintain jobs and promote innovation.
The current scenario of uncertainty and tension in the negotiations between Volkswagen and the unions represents only the tip of the iceberg. If Europe fails to act, this crisis could spread to other economic sectors, generating a chain of negative effects that would seriously affect the European economy as a whole.
Technical aspect
Volkswagen (Ticker AT: VOW3.GE) has currently been unwinding a cycle closure initiated in 2020. Since March 2021 the company has been consistently losing value, down approximately -65.5%. Since August 6 the company has been moving in a range between €99.26 and its all-time low of €87.50. It is currently located in an area testing the lows and if it manages to sustain the value could move again to the 100 euros area to test possible perforations of the bearish channel. Given the evolution of the automotive company's drift, it will not be unusual to see a continuation of the channel towards lower prices if it pierces the current support. The downward pressure is relatively strong, even though the company is trying to remain in a price zone close to 90 euros per share. The checkpoint is fragmented because in August this year its strong zone was around 120 euros per share and the current POC is above 114 euros. The RSI is slightly oversold at 46.15%. We will have to see the factors related to the company to see if the RSI advances with more downward pressure or on the contrary corrects.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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