The departure of the main European manufacturer is raising many concerns. The president of the Volkswagen brand himself, Thomas Schäfer, declared in a meeting with 2,000 managers that “the roof is on fire .” Some words with which he tried to draw the attention of those responsible for the group and where he indicated that ” nothing less than the future of the brand is at stake, and very difficult weeks and months lie ahead .”
The signs are quite worrying in themselves, and for example these days it has been confirmed that Volkswagen will eliminate 270 positions at its Zwickau plant, which will be followed by others until it reaches more than 2,000 fewer workers.
The root of the problem is the low demand for its electric models, which has also led to the production of the Dresden plant stopping, while at the Emden plant, the employees who manufacture the ID.4 had to work reduced hours for summer.
But all this is just a preview of a crisis that will probably affect the entire company and that has its origin in the slow approach towards the electric car, which has coincided with a strong expansion of its demand in the main markets.
The president of the group, Oliver Blume, indicated that ” this period is simply a transformation that requires great effort and must be approached decisively .” In an attempt to calm the atmosphere surrounding the German manufacturer,
But a look at Volkswagen’s three most important markets shows that things are not going in the right direction, but quite the opposite.
The situation in China
China is Volkswagen’s most important market, where around a third of all its factories are located. Plans to return to its old pre-pandemic volume are obsolete and the loss of market share is relentless.
For now, Volkswagen manages to survive thanks to its combustion engine cars. However the Chinese market is rapidly turning towards electric cars, and there the Wolfsburg company barely plays a residual role in registrations.
The market share barely reaches 3%. If the company wanted to become a leader in the electric segment, it would have to sell 100,000 or even 200,000 electric cars per month. In August it only managed to sell 20,000 units.
An example of the changes that are taking place is that until now it was Volkswagen that taught the Chinese how to make cars. Now it is the Germans who have to partner with Chinese brands to be able to access their knowledge, and for which they have sealed an agreement with Xpeng to design new cars.
The problem is that the first results will not be seen until 2026, and many wonder what will happen if this proposal is not successful.
If things were not already difficult enough, the EU has added fuel to the fire by accusing China of inflating its electric car brands with illegal public aid and threatening to implement tariffs. Something that could have a harsh Chinese response and cause the collapse of foreign brands in its market, with Volkswagen having a total of 33 factories in the Asian giant.
No less incendiary for Volkswagen are the recent statements by German Federal Foreign Minister Annalena Baerbock, who called the Chinese head of state, Xi Jinping, a dictator.
According to Volkswagen management, the group’s profits are no longer sufficient for long-term survival and should therefore be increased by a group-wide savings program.
United States, the alternative
Given that China is going to be a tough nut to crack, Volkswagen has begun to invest heavily in expanding its production in the United States.
There, the manufacturer wants to increase its market share from 2 to 5%, and then to 10% in 2030. The company had already set this goal once but realized that it could not be achieved by selling cars with combustion engines, now looking at electric cars.
The problem is that this plan is also failing. For example, the ID.4, is already manufactured in the United States. An SUV that Volkswagen estimated would sell 90,000 units this year. However, the sales figures indicate that Volkswagen is going to have to rethink its strategy if it does not want thousands of unsold units to accumulate in its warehouses. And in the first half of the year, only 16,500 ID.4s were sold in the United States.
A burden means that while the global car sales market has grown by 13%, Volkswagen’s sales share not only is not growing but is decreasing. Instead of moving towards the 5% objective, in the first half of this year, it has barely reached 1.5%, below the 2.2% achieved the previous year.
The point is that the American market is also moving in the direction in which the competition will take the bulk of the sales. You only have to look at the dynamics of Tesla, which continues to accelerate its growth in sales and share, with almost 60% of the electric cars currently sold in that market, and according to Goldman Sachs, still with room to lower prices further.
Europe, the great hope?
We might think that Europe is the great hope for Volkswagen. But things are not going very hopeful either.
The Volkswagen Group has the advantage of its positioning here and is the clear market leader with a market share of 26%, including all technologies. But also in this case the group is going through difficult times with its electric cars.
Electric sales are booming in Europe, increasing 60% in July compared to the same month last year. The market share of electric cars increased from 9.8% in July of the previous year to 13.6%, reaching 21% in August. Practically on par with diesel cars.
But it is Tesla who is taking the lead. The American brand has managed to register 182,000 units of the Model Y and Model 3 in the first half, placing both in first and second place in electric sales in Europe.
For their part, the Volkswagen ID.4 and ID.3 (fourth and fifth place in sales), together only achieved 77,000 units sold. Something that is causing a slowdown in production in its main factories.
It now remains to be seen which direction the Volkswagen board will take, whether to give Oliver Blume more time and wait to see if the fire on his roof goes out, or on the contrary, they see that the firefighters have not even left the station, and decide to make more drastic decisions.
