European carmakers are struggling. They are fighting fires on several fronts: trade wars; tight emissions controls; conflict in Ukraine that closed Russia to sales and denied supplies; policy switches over electrification; pandemic hangover, which continues in supply chains; falling consumer demand and fierce competition from Asian manufacturers.
The latest to feel the heat is Volkswagen. The German giant has reported its first quarterly loss for five years, of €1.07 billion ($1.24 billion). The firm, whose brands include Skoda, Seat, VW, Audi and Porsche, is citing Donald Trump's tariff blitz for costing it €5 billion a year.
“The result is much weaker compared to the same period last year,” Volkswagen finance chief Arno Antlitz said. “Higher tariffs, adjusting the product strategy at Porsche and write-downs to Porsche's value cost €7.5 billion.”
Aston Martin has also unveiled gloomy figures. To slash costs, the British luxury marque is reviewing plans for upcoming models. “This year has been marked by significant macroeconomic headwinds,” said its chief executive, Adrian Hallmark. Third-quarter revenue was down 27 per cent versus the same period last year, with the sharpest drop in the UK, where Aston Martin’s wholesale volumes fell by nearly a third.
As if that was not bad enough, fuel has been thrown on the flames from an unexpected quarter. Assembly lines could grind to a halt because of a growing dispute between the Dutch government and Chinese-owned chipmaker Nexperia, which is headquartered in the Netherlands.
At the weekend, German auto parts supplier Bosch announced it is preparing to furlough staff at its Salzgitter plant if the row is not resolved. Volvo Cars and Volkswagen have warned they are also trying to avoid temporary site shutdowns in Europe as a result of the standoff. The fallout is not confined to Europe: Honda is cutting or suspending production at its plants in North America.
In short, given everything else that is going on, the industry needs the Nexperia impasse like the proverbial hole in the head.
Nexperia makes low-level chips that are widely used in electronic systems in cars to operate the lights, airbags, locks, windows and so forth. Not only in vehicles, Nexperia semiconductors can be found inside a wide range of household consumer and mobile electrical devices and equipment, including refrigerators. Originally part of Philips, the business was sold to a Chinese consortium in 2017 and was later bought by China’s Wingtech, its current owner.
Without warning, on September 29 this year, the Netherlands seized control of the company. Claiming they were worried about the continued supply of the semiconductors, the Dutch invoked a piece of Cold War legislation from 1952 called the Essential Goods Act or the “Goods Availability Law” to take charge of Nexperia.
If it was their intention to guarantee future access to the chips, the decision has backfired spectacularly. The semiconductors are manufactured in Europe, but tested and packaged in China. In response to the Dutch move, the Chinese government reacted in the way you might expect and five days later, on October 4, they slapped export controls on Nexperia. That endangered car manufacturers and resulted in European diplomats desperately scrambling to unravel the mess.
The Dutch maintain they acted with the best intentions. But the widely held suspicion – not denied by The Hague – is that the sudden grab forms part of a larger game of chess, and that it was really acting to appease US interests. Nexperia owner Wingtech has been flagged by the US government as a possible national security risk.
The Dutch Minister of Economic Affairs, Vincent Karremans, has acknowledged that Chinese authorities suspect co-ordination between the Netherlands and US. This is because the Dutch intervened on the same day as the US Bureau of Industry and Security applied the “50 Percent Rule” and placed Nexperia on its export control list.
That is the September 2025 US law applying restrictions to any company that is owned 50 per cent or more by a foreign party on its Entity List. Nexperia is affected because it is a wholly-owned subsidiary of Wingtech, which was added to the list in late 2024.
“Of course, they suspect that we’re colluding with the Americans, which is not the case,” Karremans said. “That’s why we immediately intensified diplomatic engagement to explain that.” He insisted he took the preliminary decision to intervene several days before learning that US authorities would add Nexperia to their blacklist on the same weekend.
“We wondered whether this was a coincidence, but the explanation we received was that, due to the impending US government shutdown, they wanted to finalise the listing beforehand, to be safe,” Karremans said. “So yes, both actions happened on the same day, but it really was a coincidence.”
If so, it was a coincidence with huge ramifications. Nexperia supplies 49 per cent of the European automotive industry. The European Automobile Manufacturers' Association, or ACEA, lobby group is warning that output will be harmed. “Without these chips, European automotive suppliers cannot build the parts and components needed to supply vehicle manufacturers and this therefore threatens production stoppages,” the association said.
Analysts at Deutsche Bank are forecasting a 10 per cent drop in production, while warning of a 30 per cent cut in a “worst-case scenario”, just in Germany.
Companies are rushing to find alternative sources, but they will be lucky. Getting the substitutes approved takes time. “They're looking frantically for other suppliers, but these firms cannot build production capacity overnight,” said Ferdinand Dudenhoeffer, director of Germany's Centre for Automotive Research. He added that “this situation could go on for 12 to 18 months”.
Meanwhile, other firms with China links are wondering if they will be next on The Hague hit list. The episode sends a clear signal: there is an elevated threat to companies doing business in the Netherlands which is severely damaging the confidence of all Chinese enterprises and potential investors in Europe. Already, the seizure of Nexperia is having a knock-on impact on foreign investment in the Netherlands and across Europe. Investors value certainty and clarity, and by behaving in the manner it has, the Dutch government has fostered uncertainty.
The Dutch are thought to want to create a domestically-owned Nexperia successor. That, though, is unlikely to be easy and is fraught with business and legal implications. Certainly, there seems to be a degree of naivety on the Dutch part. As someone at Wingtech said: “Wingtech will robustly defend its rights and use every legal avenue to do so. The Dutch action is based on political conjecture, not commercial reality or legal principle.”
He said: “The actions of the Dutch government appear to be aimed at allowing a new Dutch-owned company to take Nexperia over. However, any Nexperia-successor company is doomed to fail.”
The Wingtech insider argued: “The customers simply won’t follow the new company. Due to the global nature of semiconductor supply chains, 80 per cent of Nexperia’s back-end capacity is within mainland China, and that’s where the customers will continue to get these parts.”
He predicted: “If this matter is not resolved very soon, there will be no company left for customers to return to, and hundreds of people in the Netherlands, Germany and the UK will lose their jobs with many more affected indirectly across Europe. Nexperia’s European employees are very concerned about this, but the company’s senior Dutch management appears oblivious to these concerns.”
At the weekend, as Bosch was issuing its warning, Wingtech published its third-quarter earnings. Nexperia’s numbers were contained within that. Nexperia delivered 4.3 billion yuan ($604 million) in sales, up 12 per cent year-on-year, and net profits of 724 million yuan ($102 million). These were record results for Nexperia.
If only Europe’s car companies could say the same any time soon.
