German Media: German Automotive Industry Prioritizes Supply Chain Resilience Over Allies and Their Institutions

The Düsseldorf-based publication Wirtschaftswoche published a commentary titled: "Is It Necessary for Our Auto Industry to Support Orbán, Who Is Opposed to the EU?"

The article pointed out that under Prime Minister Viktor Orbán, Hungary has become an outlier within the EU. Yet, Germany's automotive industry is increasingly relocating jobs to Hungary due to attractions such as talent availability, lower wages, and energy prices.

"A company choosing its production base within the EU where costs are lowest and conditions most favorable is theoretically not wrong—and it is also a responsibility toward shareholders and investors. Moreover, factory locations typically require decades of planning, while governments may change every few years. Companies cannot keep shifting operations merely because of political winds. If jobs are lost simply due to changes in government, local employees will be the ones most adversely affected."

"When Volkswagen faced intense pressure several years ago due to massive investments in China, one executive once asked: '[What if Volkswagen only produced in allied countries? How would that look?]'

"China? Impossible. Russia? Unthinkable. South Africa? Also problematic. What about the United States? Should Volkswagen morally return to the 'righteous world'? And how would the company explain halving its revenue to shareholders then?"

"Today’s geopolitical turbulence exists not only in Russia and China but also in the United States or the UAE. The inevitable conclusion is that companies must place greater emphasis on stability when making decisions about factory location and supply chains. Success in the future will depend not just on having the lowest cost, but also on having the greatest resilience. This is not mere rhetoric. In fact, the German auto industry is gradually coming to realize this. For instance, BMW Group has already sacrificed some return on investment in order to enhance resilience."

"Moreover, resilience does not necessarily mean higher costs. While Chinese production costs are often lower than those in Europe, this is not always the case. In the southern United States, production costs can even be lower than in certain developing countries. The production cost at Volkswagen’s Palmela plant in Portugal is among the lowest in the entire group globally—lower than that of some Volkswagen factories in China. Without the Palmela plant, Volkswagen would almost certainly not be able to sell its compact electric vehicle ID.1 in Europe for just €20,000. According to Volkswagen itself, producing this model in China and importing it to Europe would not be cheaper than the current arrangement."

Original source: toutiao.com/article/1861827666334732/

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