A report by Alix Partners, an automotive consulting firm, spells out what we at TTAC have been saying for some time; Europe’s auto industry is facing a major crisis of overcapacity, but no steps have been taken to remedy the matter.
the consulting firm estimates that there are 26 million units of excess capacity, or the equivalent of 40 assembly plants.
To make matters worse, only three plants have been closed in the last four years, while new facilities in Russia other Eastern European companies have popped up. In that same time-frame, American automakers closed 18 factories as they underwent their own crisis.
Europe’s market has shifted drastically in the last two decades; low-cost cars have gone from being the smallest market segment to the largest, while gains in the premium sector have also helped put a squeeze on the middle from the other side. Of the 10 major automakers in Europe, the 5 who are operating below 75 percent capacity (which ensures profitability) are all mainstream automakers. The other 5 who are operating over that threshold all have strong premium brands, whose wares are being snapped up by eager customers all over the world.