Summary
- Volkswagen is considering shutting two German factories as it struggles with the transition away from fossil fuels
- Traditional European carmakers are finding it difficult to switch from petrol and diesel cars to electric vehicles
- Competitors from China have lower costs and higher profit margins in the electric vehicle market
- Volkswagen is also considering a U-turn on previous investment commitments for electric vehicles
- The proposed closures are being met with resistance from the works council and the union, who are concerned about the impact on jobs and sites
Article
Volkswagen is considering closing two German factories as it struggles with the shift away from fossil fuels. The potential closures would be the carmaker’s first ever in its home country, with the possibility of shutting down one larger vehicle manufacturing plant and one component factory in Germany. The move comes as traditional European carmakers face challenges in transitioning from petrol and diesel cars to electric vehicles, which are currently less profitable. Chinese electric vehicle manufacturers are increasing pressure on European and US carmakers due to lower costs and higher profit margins.
Ford recently cancelled plans for a new electric SUV citing Chinese competition, while General Motors, Mercedes-Benz, Bentley, and Tesla have also faced challenges with electrification plans. The EU has imposed tariffs on Chinese imports, arguing that they benefit from unfair subsidies, but Chinese manufacturers may still sell cars profitably in Europe due to cost advantages. Volkswagen’s chief executive, Oliver Blume, acknowledged the demanding situation in the European automotive industry and the need for decisive action in an increasingly competitive market.
The potential closure of factories in Germany would represent a significant strategic shift for Volkswagen, as well as being politically controversial in the country’s automotive industry. Germany’s economy has been on the brink of recession for nearly two years, affecting the car industry’s ability to fund new electric car projects. The pressure on the German economy adds to challenges faced by Chancellor Olaf Scholz, especially in the wake of far-right party victories in state elections.
Volkswagen is also reconsidering previous investment commitments, including a compact electric SUV and Trinity saloon models meant to secure production at its main plant in Wolfsburg and another factory in Zwickau. The works council at Volkswagen has vowed to resist the proposed closures and accused the company’s board of failure. The council emphasized the need for a strategic boost focusing on product, complexity, processes, and synergies, rather than one-sided cost savings at the expense of the workforce. The union IG Metall also condemned the potential closures as irresponsible and dangerous, pledging to fight to protect jobs and sites within the company.
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