VW’s China slump turns Blume into a champion of protection

Volkswagen Chief Executive Oliver Blume has thrown his weight behind tougher EU protection against Chinese automakers, aligning the group with France just days before an EU summit on China trade. The shift comes as third-quarter figures show Volkswagen’s deliveries in China falling by almost 40%, the latest heavy blow in a market that has long kept Germany cautious.

Speaking at the group’s ‘For Europe’ event in Paris, held on the eve of the city’s motor show, Blume endorsed the European Commission’s ‘Made in Europe’ plans. “Anyone who wants to sell here should compete under comparable conditions and also create jobs and value in Europe,” he said. “I’m not talking about protectionism. But from an industrial policy driven by European interests.”

He shared the stage with French Industry Minister Sébastien Martin, who is a long-standing advocate of tougher trade defence. “Now is the moment when France and Germany, as Europe’s largest car countries, must work together,” Blume said. Martin claimed vindication: “The EU tariffs on Chinese e-cars were right. They had an immediate effect,” he said, citing a fall in Chinese automakers’ share in France from 40% to 11%.

The numbers handily explain Volkswagen’s sudden change of heart. The automaker delivered 1.89 million vehicles in the third quarter, down 14.3% year-over-year, after declines of 4% in the first quarter and 8.6% in the second. Deliveries in China plummeted by 38.5% to around 406,000, taking the nine-month decline there to 30.2%. “The significantly declining overall market in China remains an industry-wide challenge,” said Martin Sander, the group’s Head of Sales.

For years, Germany had resisted tougher measures for fear Beijing would retaliate against its automakers’ Chinese operations. With that business shrinking by almost a third and German automakers no longer expecting to regain their former volumes—or even close—the cost of confrontation has fallen just as the threat at home has grown. Chinese brands took 13.5% of German electric vehicle (EV) sales in September and more than 26% of Western Europe’s plug-in hybrid market in the second quarter, up drastically from 2.2% two years earlier.

With sales in reverse elsewhere, Europe is now carrying the group. EVs made up around one in five of its 2.96 million European deliveries in the first nine months; EV orders rose by more than half in the third quarter and now account for 40% of the order backlog. The Electric Urban Car Family, comprising the ID. Polo, ID. Cross, Škoda Epiq and Cupra Raval, has drawn almost 150,000 orders and shares more than 80% of its components.

Yet the automaker’s own supply chain only partly passes the test Blume is setting for others. The group relies on Chinese batteries, its Chinese partner Gotion is taking a larger role in its European battery plants, and the hybrid quota agreed with Beijing last week counts European automakers’ China-built hybrids alongside those from Chinese brands. Defining “European” by where value is created will therefore cut both ways for Wolfsburg.

Blume’s call for cohesion and solidarity is not landing well with its own employees. The automaker reneged on a former collective bargaining agreement to cut a further 50,000 jobs—around half of them in Germany—for a total of 100,000. Thus far it has terminated ten agreements and has left the futures of Emden, Hanover, Zwickau and Audi’s Neckarsulm site unresolved. “The latest interview really knocks the bottom out of the barrel,” said Works Council head Daniela Cavallo, after Blume suggested in an interview that employees’ holiday entitlement could be cut.

Blume’s pivot is striking because it removes German industry’s main objection to EU trade protectionism—whether or not he is fond of the term—and the hybrid cap shows how quickly Brussels can act without it. However, protection can only ensure that more cars sold in Europe are built in Europe, not that they are built in its German plants specifically.