Thousands to be laid off as Europe's car industry suffers

Vishala Sripathma (0:01)

Are the hazard lines going on for Europe's car industry?

Matthias Schmidt (0:04)

We're seeing Chinese manufacturers enter Europe from a much lower cost base. The likes of German manufacturers simply really need to cut their costs as soon as possible.

Vishala Sripathma (0:15)

It's World Business Report from the BBC World Service. I'm Vishala Sripathma. On the way, Europe's car makers are facing challenges from every direction. We'll look at why some of the industry's biggest names are feeling the strain and why the European Union is betting big on Greenland.

So another sign today of the pressure facing Europe's car makers, Jaguar Land Rover has confirmed plans to cut around 4,000 jobs worldwide. The company says it needs to make major savings as sales come under pressure and competition intensifies. For the thousands of workers affected, it's deeply worrying news. But how concerned should the wider industry be? Well, Peter Hughes is from Unite, which represents many Jaguar Land Rover workers.

Peter Hughes (1:15)

The company is outwardly facing, saying to the outside world that these 4,000 jobs are going to go over the next two years, whereas they're telling the workers that they want most of these 4,000 jobs gone by the end of November. So it's a very confusing time of the moment, to be honest here.

Vishala Sripathma (1:30)

And Jaguar Land Rover isn't alone. Volkswagen announced plans last week to cut 50,000 jobs on top of the tens of thousands already being cut as it tries to bring down costs.

So why are some of Europe's biggest car makers having to cut back so heavily? Well, earlier I spoke to the BBC's transport correspondent, Theo Leggett.

Theo Leggett (1:52)

Jaguar Land Rover is facing up to the same challenges as a lot of other companies in the car industry, but some of them are particularly acute. So for example, it has seen its sales fall in all its major markets last year.

That's partly down to the effects of the cyberattack that it suffered in September last year, which knocked out production for more than a month and disrupted production for a large part of the last year.

But it's also down to the way in which markets are changing. So one of its most important markets is China. And for much of the last decade, China was seen as somewhere that Western car makers could go and make lots of money because you had a growing middle class of people who wanted luxury vehicles and they had the money to pay for them and they liked old fashioned European brands. But that market is changing. The Chinese government has been supporting the development of local producers, particularly when it comes to electric cars. They've been investing heavily. They've been developing that technology. And suddenly these days, they're much more dynamic than Western companies. They develop cars much more quickly. Their technology is arguably just as good and they can produce cars more cheaply. So now in the Chinese market, there's intense, intense competition.

The economy in China, however, is not doing so well, so sales are falling. And what you have is this once lucrative market is no longer so lucrative. Plus Chinese car manufacturers are looking at that market and saying, well, that's not very good. We're going to try and sell cars elsewhere. So they're moving on to the Western brands territory as well. And all of that has been a big problem for JLR.

Vishala Sripathma (3:34)

So it's been pretty hard across the board for European manufacturers to compete with the likes of these Chinese companies then.

Theo Leggett (3:40)

And it's not just China. JLR has also faced problems in the United States. So last year, the White House introduced swinging tariffs on imports from Europe and the United Kingdom. Now, those tariffs have been reduced from what was originally tabled, but they're still much higher than they were before the process began. So that's hurt the company as well, because the United States is a major, major market. And we've also seen falling sales in Europe as well. So it's been coming from all sides, really.

Vishala Sripathma (4:09)

In terms of the car manufacturers and JLR in this instance, they have to grapple this idea of cutting jobs, but also investing in the future. How do they do that?

Theo Leggett (4:19)

With difficulty, and that's the problem. And if you look at JLR, three years ago, they launched an electrification programme, which was due to cost in the region of $18 billion. Now the first fruits of that programme were unveiled last week. It was an electric Range Rover. That's great. Hopefully it'll sell for the company, but there's no guarantees.

More controversially, JLR is also relaunching Jaguar, one of its most resonant brands, as an all-electric mark. And that's provoked controversy, partly because of the way they've done it, which was seen by some as being excessively woke, playing into the culture wars. But also, they're moving that brand up market. They're developing all electric cars, which are going to cost a great deal of money.