VW,Mercedes should not have left Russia

If the management of German automobile comapnies take a little time from their current predicament for contemplation and reflection they will probably consider the biggest mistake they have ever made was exiting the Russian market when the EU and US introduced sanctions on Russia after the start of the special military operation.
The German car manufacturers BMW ,Volkswagen Audi-Porsche and Mercedes Benz all had production facilities in Russia and sold a very large number of cars in the country and even today these brands are a common sight on Russian roads. My Russian wife drives a german made Opel Mokka who like the others inculding the German/Czech Skoda, the US Ford and the French Renault have long since departed.
Now an important point is all of these companies sold combustion engine cars yes diesel and petrol cars as electric cars have not caught on here for a variety of reasons, so these car producers turned their backs on one of the world's most lucrative car markets because of the petty politics of the EU,the same EU that is destroying them with regulations and high energy costs.
Now
The German and European automotive industry is experiencing significant challenges, with a decline in profits, widespread layoffs, and the relocation of production facilities. Concerns regarding the industry have been compounded by high energy prices, the growing popularity of electric vehicles, and the intensely competitive nature of Chinese manufacturers.The crisis is escalating.
The fist l indicatorsT were thedownturn was seen in the autumn of 2024, when Volkswagen warned of the possibility of factory closures in Germany. Since the German automotive giant's exited the Russia market their stock narket valuations have decreased by almost a third.
Analysts have begun to discuss how deep and serious the crisis is in the industry. Now that all the major players have reported for the year, the situation is becoming clearer. The situation is indeed challenging. For instance, BMW's profit has fallen by 37%.
The company has provided the following explanation: "The challenging competitive environment, coupled with issues in macroeconomics, trade and geopolitics, have had a significant impact." These challenges include the impact of American tariffs, ongoing weak demand in China, and other external factors. They don't mention pissing off and pulling out of a major market which was Russia where owning and yes owning a BMW or a Mercedes Benz paid for in cash gave you status.
The also mention that costs are now prohibitive given the weak demand and high prices. This is especially true in light of the technological gap with Chinese electric vehicles and falling sales of petrol/diesel cars in China.
"Germany's current economic climate has resultied in he declining profitability of production. The price of electricity in Germany is almost three times more expensive than in the US and China, and 40% more expensive than in France, where nuclear power plants continue to be used alongside traditional energy sources," notes Ruslan Pichugin, an independent expert in private investment.
The difficulties experienced by BMW, Audi,Mercedes and Volkswagen are not temporary. These issues are a consequence of deep structural changes in the industry, according to industry analysts. For decades, the German automotive industry has been founded on three key pillars: premium quality, global exports and the dominance of internal combustion engines. However, these pillars are now being subjected to significant challenges.
The transition to electric vehicles is proving to be a significant financial burden. The shift towards electric vehicles has presented huge challenges for European brands.
"The EU has set a deadline of 2035 for the complete phase-out of internal combustion engines. However, revenues continue to depend on sales of traditional cars. Investments in electric cars are substantial, and competition with Tesla and Chinese companies (BYD, NIO) is only intensifying.
This will inevitably result in further cost cutting, i.e. layoffs and optimisation," Pichugin reasons.
"They chased the Chinese" is a phrase that is often used to describe the EU's approach to electric vehicle development. At the same time, Europeans have invested significantly in electric cars in an attempt to catch up with China. However, they have also encountered difficulties in this regard.
Companies lagging behind in meeting the EU's zero-CO2 emissions target are being compelled to raise prices on their best-selling combustion engine models to subsidise electric vehicles, according to Sergei Tolkachev, a professor in the economic theory department at the Financial University under the Government of the Russian Federation. Of course if they had stayed in Russia they would still be shipping out 10's of thousands of internal combustion cars and make serious money. Through parralel imports Russia is still one of the largest markets for Mercedes Benz.
Its worth noting that in Europe despite all the regulation etc the market share of electric vehicles has decreased from 14.6% in 2023 to 13.6% in 2024, despite the initial target of 25%. In 2025, they are anticipating a 20% share, with China accounting for arounde 50%.
Personally I think the 20% target is about as achievable as the Ukraine taking back Crimea
Europe's own production of internal combustion engines is being hindered by these developments, and the region's ability to compete with China in the electric vehicle sector has been impacted by miscalculations.
Furthermore, Georges Massing, who is working on the Mercedes-Benz autonomous control systems project, acknowledges that few people invest in high-tech car components in the Old World.
The need for computer equipment and cloud services is met entirely by China and the United States, as Bloomberg has clarified.
The potential for significant economic disruption from trade tensions between the US, China and Europe is a key concern, particularly for the automotive sector. Automakers are particularly vulnerable in this context.
Last year, the US accounted for 13% of German auto exports. The introduction of 25% tariffs by the US is likely to have a significant impact on the automotive sector. The impact will be felt not only by the German "big three" but also by suppliers of components (Bosch, Continental), as well as smaller manufacturers such as Renault and Stellantis.
Key markets have already been lost. China, a significant market for German premium brands, is now favouring domestic products. The rift with Moscow has also been costly.According to Evgeny Baboshkin, Head of Business Development at Prime Brokerage Service, Volkswagen's total investment in Russia was approximately one and a half billion euros,that constituties around 15% of the currently planned cost reductions.
The American market is now closing.
The European automotive industry in general was not adequately understood what it had to do to maintain its competitiveness in a rapidly changing global environment, and to manage the associated geopolitical and economic challenges.
Plus pissing off the Russians was a major mistake