For the first time in its history, Volkswagen is planning to shut down a facility on its home soil. The corporation plans to close at least three German production facilities due to increasing pressure from the Chinese market. Volkswagen warns of impending mass layoffs and pay cuts as it struggles to absorb the impact of aggressive price reductions.
Volkswagen announces sweeping restructuring measures, including job cuts and facility shutdowns, as part of a broader effort to revamp its operations and stem losses.
A year ago, Volkswagen shocked the automotive world by announcing plans to potentially close one of its German plants, marking a significant milestone in its 87-year history.
Chief Executive Officer Oliver Blume warned employees that a 30-year-old commitment to prioritizing workplace safety was under threat. The company pledged to apply measures to protect its Volkswagen workforce and prevent potential layoffs until at least 2029.
The German automaker’s market share and earnings experienced a decline in the European market. Twelve months on, the situation has only deteriorated further.
The corporation warns that several German crops face significant vulnerability to closure. Additionally, Volkswagen has announced that massive layoffs and pay reductions will soon hit its domestic market.
Volkswagen’s works council leader, Daniela Cavallo, revealed the company’s restructuring plan, which involves shutting down at least three German production sites, slashing thousands of jobs, and implementing a 10% pay cut. According to a representative of the works council, the vulnerable crops directly impact the production of 10 key models for Volkswagen vehicles.
Although Cavallo did not disclose which specific crops were under threat, a recent report highlighted concerns over the viability of Volkswagen’s (VW) cutting-edge Audiu factory in Brussels, where the Q8 E-Tron is manufactured, citing waning demand as a major factor behind its diminishing value.
Mounting strain from low-cost EVs
As Volkswagen struggles to maintain its competitive edge, the pressure mounts from low-cost Chinese automakers like BYD.
Following a period of significant success in its domestic market, BYD is now poised to replicate this momentum in strategic international territories including Europe, Southeast Asia, and Latin America.
As BYD aggressively expands its presence in the Chinese market, it is pushing Volkswagen and other international automakers to the periphery by offering a range of ultra-affordable electric vehicles, including the Seagull EV, which debuts at an unprecedentedly low price point of just below $10,000 (69,900 yuan) in China.
As fresh fashion trends emerge, BYD is poised to disrupt traditional markets with its innovative offerings, exemplified by the impending launch of the mid-size Sealion 7 electric SUV in Europe, marking a significant expansion into the historic stronghold of established automakers.
As Volkswagen’s market share erodes both domestically and internationally, the company confronts declining profits, prompting a series of cost-cutting measures and a reduction in its extensive manufacturing network to reclaim lost ground.
Volkswagen reported a 3% decline in global deliveries for the first nine months of 2024, with 6.52 million vehicles sold.
Although Volkswagen experienced gains in market share in North America (+7%) and South America (+15%), an “aggressive scenario” saw declines in China (-10%) and Western Europe (-1%), partially offsetting the growth. Volkswagen’s deliveries in its domestic market slid 1.6% amidst challenging conditions.
Will we delve deeper into Volkswagen’s financial situation, with Q3 earnings set to be released on Wednesday? Porsche provided a preview of its financial performance on Friday, revealing a 41% year-over-year decline in third-quarter earnings. Luxury vehicle sales have plummeted 41% through September, a stark decline in demand for high-end models.
