Net Zero is the root cause of deindustrialization as Germany’s Volkswagen cuts 100K jobs

Energy News Beat

Volkswagen’s board has approved the largest restructuring in the company’s 89-year history: about 100,000 jobs gone by 2030, a slashed model lineup, and four German plants—Emden, Zwickau, Hanover, and Audi’s Neckarsulm—facing a phased wind-down between 2031 and 2034. That is not a cyclical downturn. It is what happens when energy policy prices a manufacturing nation out of its own industry.

The official explanations—Chinese EV competition, U.S. tariffs, weak demand, and a costly electric-vehicle transition—are real. They are also downstream of a more basic fact: German and European industrial electricity has been structurally far more expensive than power in the United States or China, and Net Zero rules, carbon pricing, grid levies, and forced electrification have locked that disadvantage in. Energy-intensive output in Germany—chemicals, paper, metals, glass, cement—was already down nearly 18 percent from 2021 levels. Steel production sits at multi-decade lows. Chemical plants have been running well below the profitability threshold. VW is the headline. It is not the exception.

High-cost energy plus climate mandates equals a shrinking industrial base

Volkswagen’s own case is the clearest example. The company faces Chinese rivals that export subsidized, lower-priced EVs into Europe; EU climate rules that impose quotas, fines, and a forced shift off internal-combustion platforms; and German production costs that management has described as roughly 30 percent too high versus competitors. The group is cutting models by about half by 2035, shrinking capacity by more than 500,000 vehicles a year, and looking for alternative uses for plants that no longer have a competitive future once current programs end.

Chinese brands remain cheaper even after EU countervailing duties. Imports from China of passenger cars rose sharply in 2025. Chinese OEMs now account for a rising share of those shipments. Western brands have moved some China-built EV production back to Europe, but Chinese brands have filled the gap, and battery and PHEV channels not fully covered by tariffs have expanded. The result is overcapacity at German plants and a consumer market that no longer supports the old high-cost European production model.

Energy is the multiplier. EU industrial electricity has run roughly twice U.S. levels. German energy-intensive users were still paying well above pre-crisis prices after subsidies; comparable U.S. Gulf Coast or Permian plants pay far less. Berlin has now resorted to an industrial electricity-price subsidy targeting 5 euro cents per kWh for a portion of consumption—taxpayer money to offset the cost of a transition the state mandated. That is not competitiveness. It is life support.

The same pattern is visible across the Rhine and the Channel. UK industrial electricity has been among the highest in the OECD—often double continental European levels and three to four times U.S. or Chinese prices. Energy-intensive output has collapsed: steel from 12 million tonnes a decade ago toward 4 million; chemicals down sharply; refineries closing; aluminum smelting almost gone. Manufacturers’ surveys warn of deindustrialization unless prices fall. A quarter of surveyed firms have moved production or plan to. Net Zero levies, network charges, and carbon costs sit on top of gas-price exposure. Territorial emissions look better because production—and the emissions that go with it—has been offshored.

Cheap Chinese imports are filling the hole Western policy created

The EU, UK, and Canada are not being “infiltrated” in a conspiratorial sense. They are being outcompeted in a market their own energy and climate rules made expensive, while China built the world’s dominant EV and battery complex on cheap coal power, scale, and industrial policy.

In Europe, made-in-China BEVs still account for a large slice of the EV segment. Tariffs slowed some Western-brand re-exports from China but did not stop Chinese brands; BYD and others grew. PHEVs and batteries provided additional channels. Chinese FDI into European auto and EV supply chains has surged. Mercedes is partly Chinese-owned. The Conservative Treehouse analysis of the VW deal is blunt: EU climate politics, carbon-credit purchases from China, and technology transfer in China helped create the competitor now undercutting Wolfsburg.

Canada opened the door further. After matching U.S. 100 percent tariffs on Chinese EVs, Ottawa under Prime Minister Mark Carney swapped that wall for a quota: 49,000 Chinese EVs a year at 6.1 percent tariff, rising toward 65,000–70,000 by 2030, in exchange for relief on Canadian canola and other farm exports. Officials say they want joint-venture investment and “affordable” EVs. The risk is the Australian outcome: assembly fades, imports rise, and the industrial footprint shrinks.

Canada’s auto jobs are already disappearing—and pipelines were the missed energy hedge

Canada’s auto sector still supports hundreds of thousands of workers and more than $16 billion in GDP, with about 125,000 direct manufacturing jobs. Production has fallen from roughly 2.4 million vehicles in 2014 to about 1.2 million in 2025. Between December 2024 and December 2025, the broader automotive sector shed on the order of 36,000 jobs. U.S. tariffs on non-U.S. content of Canadian-built vehicles, the stall in EV demand after incentive rollbacks, plant retooling and closures (Brampton, BrightDrop/Ingersoll, Oshawa shifts), and now a managed opening to Chinese EVs are all hitting at once. Industry leaders are explicit: without durable U.S. market access, Canada does not have an auto industry.

That vulnerability is worse because Canada never built the east-west energy infrastructure that would have reduced dependence on a single customer and a single set of trade terms. Energy East (about 1.1 million barrels per day to New Brunswick) was withdrawn in 2017 after regulatory costs and political opposition.

Northern Gateway was canceled. Keystone XL died. Trans Mountain Expansion finally started commercial service in 2024 only after Ottawa bought the line and absorbed tens of billions in cost overruns. A Montreal Economic Institute analysis found Energy East plus an LNG Quebec-type project could have redirected on the order of $38 billion a year in energy products away from the U.S. market. Alberta oil sold at a discount for years because it lacked sufficient tidewater options. That is not an abstract “could have.” It is forgone leverage in a tariff fight and forgone revenue that would have funded the very industrial base now under stress.

If those pipelines had been built on a commercial timeline, Canada would still export to the United States—but it would not be as trapped. It would have more Asian and European outlets, stronger fiscal capacity in producing provinces, and a better claim to energy security at home. Instead, policy treated pipelines as a climate problem first and an economic asset second.Thirty years of GDP: the U.S. pulled away while high-cost Europe stalled

Nominal GDP is not a perfect scorecard—exchange rates and inflation matter—but the last three decades still show a divergence that tracks energy and industrial policy.

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