Porsche Job Cuts: Why Europe's Car Makers Are Losing the EV Race

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Even Porsche is feeling the pressure. In February, European media reported that the German luxury sports car manufacturer plans to cut around 1,900 jobs by 2029.

The cuts will affect its factory in Stuttgart, southern Germany, which produces the electric vehicle (EV) Taycan, as well as its suburban research and development center. These reductions will be carried out through early retirement and other measures.

Porsche is renowned for its uncompromising approach to technical development and has a loyal following among car enthusiasts worldwide. The company constantly introduces innovative models, leading to the popular saying among car lovers: "The latest Porsche is the best Porsche." However, it is now clear that even Porsche's EV sales are struggling.

European manufacturers, once expected to lead the charge in electrification, are facing challenges in the EV market. Porsche's parent company, Volkswagen, is also planning to cut 35,000 jobs by 2030.

Volkswagen's financial results for the fiscal year ending December 2024 revealed a 32.8% drop in net profit due to weak EV sales. In Europe, production capacity for EVs has outpaced demand, and major parts manufacturers like Bosch and ZF are also announcing layoffs.

Rise of Chinese EVs

A key factor behind this slowdown is the rise of Chinese manufacturers. While China had little presence in the traditional engine car market, Chinese companies are now dominating the EV sector.

BYD, whose commercials have even made waves in Japan, is expanding rapidly with its low-price strategy. In 2024, its sales surged by around 40% compared to the previous year, reaching about 4.27 million vehicles, surpassing major Japanese automakers excluding Toyota, like Honda, Nissan, and Suzuki.

European and Japanese manufacturers once dominated the Chinese market for traditional vehicles, but in the EV market, they are losing ground quickly. EVs, with fewer components than internal combustion engines, have lower development barriers. This has made it easier for Chinese companies, including those from other industries and startups, to enter the market. Just as Chinese manufacturers overtook Japanese and European electronics companies with low-cost products, there are concerns that a similar shift could occur in the EV sector.

*The BYD EV showcased at an auto show in Indonesia on February 13, Jakarta. (©Kyodo)*

Commoditization of Motors

There are many reasons for the slowdown of European manufacturers, but one of the key factors is that they have let go of their "weapon."

The "weapon" of European cars is what could be considered their most defining feature: performance. The driving, cornering, and braking performance of European cars is on a whole different level compared to Japanese cars. At the heart of this performance is the engine, which has long been the greatest strength of European cars.

BMW's smooth-revving inline-six engines, often compared to silk, and the captivating sound of Ferrari's engines during acceleration won the hearts of car enthusiasts. Even in Japan, support for European cars is strong, with car enthusiasts often discussing engine performance at length.

On the other hand, I've never seen car enthusiasts passionately discuss the feel of an EV motor. The differences between EV manufacturers are difficult to convey, and it's clear that commoditization is taking place in this sector too. The inevitable decline of European manufacturers, who have lost their greatest asset—the engine—was foreseeable.

Quality and Reliability

What about Japanese manufacturers? The strength of Japanese cars lies in their reliability and high quality, with a reputation for fewer breakdowns. While this has recently been somewhat challenged, Japan still holds a global advantage in quality. In the automotive world, where safety is paramount, this remains a crucial factor.

Like their European counterparts, Japanese automakers are also struggling with the transition to electrification. Honda and Nissan, for example, are grappling with integration issues and ongoing restructuring efforts. However, there are widespread concerns about the quality of Chinese cars, which are using low prices as their competitive advantage.

While the engine may no longer be a factor in EVs, Japanese manufacturers can still rely on quality as their strength. They need to reflect on their own advantages while learning from the struggles of European companies as a cautionary tale.

(Read the article in Japanese.)

Author: Naoki Fujiwara, The Sankei Shimbun

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