Volkswagen stock chart signals Europe's industrial decline

Volkswagen on the stock market: the chart that anticipates Europe's decline

The €237 peak Volkswagen reached in 2021 is long gone. Since then, the German manufacturer's share price has been in a sustained decline which, for some observers, acts as a thermometer for something bigger: Europe's loss of industrial competitiveness against China. Those who bought at the pandemic lows and sold at the peak made a 150% profit, according to circulating calculations. Those who bought at the peak are still waiting.

The trigger cited is the emergence of Chinese electric vehicle brands after the pandemic. In combustion technology, German automakers had accumulated nearly a century of advantage by refining engines and production processes. In electric vehicles, everyone started from zero. The difference was that some moved fast while others hesitated.

The electric bet nobody bought

Volkswagen launched into electrification with ambitious plans, including a battery gigafactory in Sagunto. Toyota, conversely, viewed this with skepticism. The result, judging by the data, has not been what was expected: demand for EVs is not taking off at the predicted rate, and industrial plans are beginning to falter.

The paradox is that the solution applied to the problem involves raising the price of the brand's most iconic small car. The VW Polo has gone from €12,000 to €24,000 in just a few years, nearly a 100% increase. Housing hasn't risen like that in the same period, some joke ironically. The conclusion drawn is uncomfortable: either sell less, or sell more expensive.

Cars as luxury and housing as a mirror

With the accelerated impoverishment of the middle class, private vehicles are heading towards becoming a luxury reserved for those who need them for work and have no public transport alternative, it is argued. It is the law of supply and demand applied to two markets behaving identically: little is built, much is imported, and the price of the cheapest options skyrockets.

The same pattern seen in housing is replicated in automobiles. Less affordable supply, pent-up demand, and rising prices that no one seems able to stop. It's not unbelievable, some argue. It's the market.

Germany, China, and Europe's miscalculation

The German saver who put €400,000 into Volkswagen five years ago and now has €150,000 and falling is a symbol of a generation, according to circulating calculations. German manufacturers privately applauded emission standards that forced customers to spend more by law, and were excited by public subsidies, it is claimed. They didn't count on consumer rejection.

For some, the logical decision is to stop selling in China. There, the European luxury standard will soon be matched at lower cost. Meanwhile, the alternative being considered is importing Japan's kei car model to Europe—low power, low pollution, with tax advantages if electric—though the market will likely push towards combustion versions given the poor acceptance of EVs and their limited range.

The Draghi report and the slow slide

Europe is struggling, and the 400-page report delivered by Draghi to revive the corpse doesn't seem to have convinced anyone, according to this reading. This won't be a debacle in months like Lehman, they warn. It looks like a slow but sure decline, with countries governed by parties that, according to this view, apply policies transferring income from savers and producers to excessive public spending.

The analysis gets stuck right here: no one knows how long the German shareholder can endure watching their stake fall while the car they manufacture doubles its price and the European buyer can no longer afford it.