As Volkswagen faces challenges in adapting to a rapidly shifting market, the company struggles to stay competitive amidst the growing demand for electric vehicles. The CEO of Volkswagen’s passenger car division, Herbert Diess, cautioned that the company will not pursue a more aggressive strategy in response to declining sales and profitability, despite announcing additional job cuts on Monday.
Volkswagen intends to reduce its workforce to stay competitive with electric vehicle (EV) market leaders.
Europe’s largest automaker aims to reduce prices and boost profitability to stay competitive with electric vehicle (EV) leaders like Tesla.
“At an employee meeting on Monday, Shafer explained that due to our existing infrastructure, procedures, and high costs, we can’t be as competitive as the Volkswagen model.” According to a report posted on Volkswagen’s internal website and reviewed by Reuters, Shafer cautioned that excessive pricing and low productivity were contributing to the company’s uncompetitive vehicles.
To illustrate the challenges surrounding it, the model introduced a pioneering cost-cutting programme in June, aimed at saving €10 billion ($10.9 billion) by 2026.
Volkswagen Group’s Chief Executive Officer, Oliver Blume, aims to boost Volkswagen’s profit margin to 6.5% within the next three years. At present, it’s round 3.6%.
Gunnar Kilian, a member of Volkswagen’s (VW) Human Resources board, suggested that the company could capitalize on the “demographic curve” by implementing staff reductions, accompanied by early or partial retirement options for eligible employees.
“As a final step, we must muster the courage and sincerity to jettison redundant tasks that are simply weighing us down within the organization or serving no purpose, allowing us to focus on achieving meaningful results.”
While cost-cutting measures are being implemented through job reductions, a significant portion of the anticipated financial savings will stem from other areas outside of layoffs. By year’s end, Volkswagen will outline further details as dictated by Kilian.
Electrek’s Take
Governor Shafer issued a call for a temporary spending freeze and price controls this summer. The CEO clarified, “We’re allowing prices to escalate unchecked for several years, which is unsustainable.”
The company has suffered a series of job cuts as it grapples with the challenge of transitioning its operations to accommodate the shift towards electric vehicles (EVs). As Volkswagen’s electric vehicle (EV) orders decline in Europe, the company has proactively scaled back production at multiple German plants.
This month, Volkswagen reduced a shift and temporarily halted production at its Zwickau plant due to a shortage of essential electrical motors.
Rising inflation and interest rates, coupled with the impending end of electric vehicle (EV) subsidies in Germany, present Volkswagen with a complex predicament. The corporation is facing mounting pressure from EV market leaders Tesla and BYD, which are gaining significant traction in its key territories.
Despite Volkswagen’s assertions that demand for electric vehicles (EVs) is waning, Tesla’s Model Y appears poised to claim the top spot as Europe’s best-selling car this year.
