VW Could Close Plants In Germany, Warns of ‘Serious Situation’

An anonymous reader quotes a report from Axios: The German company says it may close plants in its home country amid what CEO Oliver Blume reportedly called “a very demanding and serious situation” for the European automotive industry. That would mark the first-ever German plant closures in the company’s nearly nine-decade history. VW is facing a pair of competition-related challenges — one outside its control, and the other of its own making. Chinese automakers are wresting market share away from VW in China, where it once held the highest share of any automaker. The company’s China sales have fallen from 4 million in 2017 to an estimated 2.5 million in 2024, according to Dunne Insights analyst Michael Dunne. And its Chinese competitors are bringing cheap electric vehicles to VW’s other critical market: Europe. Another part of the problem is that VW is a bloated company compared with its competitors, meaning it has less margin for error.

The company had some 684,000 employees in 2023. That’s about 309,000 more than the ever-efficient Toyota, which sold about 2 million more vehicles than VW worldwide last year. The VW brand’s profit margin fell from 3.8% in 2023 to 2.3% in the first half of 2024, moving in the wrong direction from the company’s long-term target of 6.5%, according to Evercore ISI analyst Chris McNally. Hence the “drastic attempt to cut costs” as the company’s bottom line suffers, McNally writes. But VW isn’t just facing operational issues and increased competition in key markets — it’s also falling behind on technology. The company recently agreed to invest in Rivian to get help from the American startup on EV development despite having 40 times more employees than its new partner. And VW’s long-awaited ID. Buzz — its EV revival of its famed microbus — recently disappointed enthusiasts with underwhelming battery range of 234 miles and a starting price of about $60,000.