Is Europe's Industrial Crown Jewel Being Quietly Dismantled?Volkswagen Group, once the symbol of German engineering dominance and post-war European recovery, is experiencing what can only be described as a structural dismantling rather than a cyclical downturn. The company faces a perfect storm of challenges: geopolitical vulnerability exposed by the Nexperia semiconductor crisis, where China demonstrated escalation of dominance over critical supply chains, catastrophic labor cost disadvantages ($3,307 per vehicle in Germany versus $597 in China), and a complete failure of its CARIAD software division that consumed €12 billion with little to show for it. The result is unprecedented: 35,000 German job cuts by 2030, the first factory closures in 87 years, and Golf production moving to Mexico.
The technological surrender is perhaps most revealing. VW is investing $5.8 billion in American startup Rivian and $700 million in Chinese EV maker XPeng—not as strategic partnerships, but as desperate attempts to acquire the software and platform capabilities it failed to develop internally. The company that once provided technology to Chinese joint ventures now buys entire vehicle platforms from a Chinese startup founded in 2014. Meanwhile, its profit engine has collapsed: Porsche's operating profit plummeted 99% to just €40 million in Q3 2024, while VW's China market share eroded from 17% to under 13%, with only 4% share in the critical EV segment.
This isn't just corporate restructuring—it's a fundamental transfer of power. VW's "In China, For China" strategy, which moves 3,000 engineers to Hefei and creates a separate technological ecosystem under Chinese jurisdiction, effectively places the company's intellectual property and future development under the control of a systemic rival. The patent analysis confirms the shift: while BYD has built a moat of 51,000 patents focused on battery and EV technology, much of VW's portfolio protects legacy internal combustion engines—stranded assets in an electric future. What we're witnessing is not Germany adapting to competition, but Europe losing control of its most important manufacturing sector, with the engineering and innovation increasingly done by Chinese hands, on Chinese soil, under Chinese rules.
