VW Could Close Plants In Germany, Warns of 'Serious Situation' (axios.com) 72
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.
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.
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Yep. Big beard, Apple sticker, and roof-rack with nothing ever on it.
Re:Not the real problem (Score:5, Insightful)
This is such a weird take. You’re talking about VW, but obviously it’s actually VAG, which encompasses everything from Skoda and Seat, neither of which could remotely be described the way you did, through to Porsche, Lamborghini and Bentley, which also can’t be described the way you did.
Do you think that the VW brand would somehow make more money if it started cannibalising Seat and Skoda sales in the value segment? Do you think that segment came through the GFC and covid better off than the mass affluent? Alternatively, are you suggesting VW should have attempted to compete more in the premium segment, where there’s already Audi (and the three luxury brands above Audi too)? How would that help? The VW brand has always focused on the mass affluent segment, and for very good reason. There was no meaningful repositioning in the way you describe.
You’re also completely factually wrong about nobody being threatened by Chinese EVs: at the very least, they have *already* taken a chunk of VW’s China sales, as the article points out. Whether they do the same in Europe and the US is less clear, but airy dismissals of the type you’re indulging in have distinct tones of Detroit in the 70s, pre-Toyota to my ears. Consumers are already mildly pissed off about spyware (and subscriptions) on US and Europe brands, so there’s no reason to expect that spyware noise is going to disproportionately damage confidence in Chinese brands. However, they absolutely see that the infotainment in almost all US and many EU marques is pretty shitty and will damn well notice how much better it is in Chinese brands. As for bursting into flames, this is a hot meme for those who get steamed up about EVs, but consumers are indifferent to the point, because they don’t think *any* car is very likely to burst into flames. Chinese EVs are formidable competitors for the rest of the market because of four factors they control and one they don’t: lower costs to produce (partly the fruits of state investment which is much more important than current state subsidies); lower prices for consumers; better tech, both infotainment and core EV eg Blade 2.0; better cabins at each price point; and competitor complacency. Tariffs are as likely to be a problem as a solution, because tariffs don’t help with any of these factors, and make complacency worse.
Re: Not the real problem (Score:2)
Don't forget slave labor
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Re: Not the real problem (Score:4, Interesting)
Almost everything we use today was either manufactured in China, or else had essential components made in China. Even the cars we drive have (on average) probably have of their components manufactured in China, including all of the wiring, all of the glass, most of the accessories (compressor, alternator, etc), transmissions, suspensions, EV batteries, the wheels and tires, etc. We are *already* driving Chinese cars in all but name.
Meanwhile other companies are already logging everything, and I mean *EVERYTHING*. Hyundai-Kia Motor Corporation, for example, withholds remote-start features from states with Right to Repair laws, because they don't want to disclose what data they're collecting. (Hint: All of it.. everything from when you recline your seat, to when you turn on your lights or wipers, change the climate controls, change the radio station, how many seats are occupied, who you call, how fast you go, how fast you accelerate, how hard you brake, and of course where you go. And they upload all of that data over cellular, whether or not you have an active cellular subscription for your vehicle, because the modem is still active and traffic is still carried to their servers).
I hate to defend China, but the problem with their cars is not the quality, or that their cars snoop (more than anyone else), it's government subsidies that create artificially low prices in the pursuit of market domination. If the People's Republic wasn't dumping billions of dollars of government funding into their auto industry, nobody would care. Hell, they probably would be dominating by now. They're certainly huge players in countries without restrictions on Chinese vehicles, which is most emerging markets, which is most of the population of earth.
Energy? (Score:2, Insightful)
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Re:Energy? (Score:4, Funny)
I know many people in Germany and have relatives there. None have mentioned this Apocalypse. According to immigration figures, Germany currently has a brain gain.
SSssshhhh. Everything is bad around the whole entire world, citizen. And getting worse. EVERY DAY! EVERYWHERE! Do not believe people you speak with personally. They haven't been vetted by our careful media selection process. Only believe what we're told by the talking heads. No personal anecdotes will serve to derail the narrative.
Because if Americans start to catch wind that the entire world isn't on fire, we may start to become suspicious of the messaging we receive. And we can't have that.
Re:Energy? (Score:5, Insightful)
The cost of natural gas in Germany seems to be not much above where it was 10 years ago: https://tradingeconomics.com/c... [tradingeconomics.com]
Certainly not double, let alone triple, what it was before, unless you very carefully cherry pick your timeframe.
VW's problem is that the emissions scandal drained cash reserves and being late to the EV game the Chinese have leap past them. Chinese brands offer German quality workmanship and interiors, but at French car-of-the-people prices. Korean brands are hurting them a lot too.
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You are picking the peak from the last 10 years, a rough averaging before the pipeline was destroyed easily show a double or tripling and is obvious from looking at the chart.
No it's not so obvious if that is your conclusion. The average gas price of the past year is around $30, the average price between 2010 and 2018 (2019/2020 had a gas oversupply issue due to economic reduction causing the price to plummet - no financial decisions were made based on the price in that time) as $20.
In no form of mathematics humans have created is $30 "double" or "triple" of $20.
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That pipeline you mentioned, was never in use.
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Nord Stream 1 was in use from 2011 to 2022 when it was destroyed. Nord Stream 2 was never in use.
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If you click on "all" it shows you back to 2010.
It averaged about 25, peaks of 45 in 2013 and 53 in 2018. So it's been more expensive before, for prolonged periods of time.
Contrary to popular belief, Germany isn't as dumb as you think and didn't become totally reliant on Russian gas.
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The cost of natural gas in Germany seems to be not much above where it was 10 years ago: https://tradingeconomics.com/c... [tradingeconomics.com]
Certainly not double, let alone triple, what it was before, unless you very carefully cherry pick your timeframe.
VW's problem is that the emissions scandal drained cash reserves and being late to the EV game the Chinese have leap past them. Chinese brands offer German quality workmanship and interiors, but at French car-of-the-people prices. Korean brands are hurting them a lot too.
Also the German governments have always been quite happy to give the German car industry loads and loads of money. So this is just the VW Execs putting the screws to Olaf Scholz (German Chancellor) for more taxpayer Euros.
Re:Energy? (Score:5, Informative)
You're correct. This article assumes the rest of the financial environment is the same as ever, and it's just Chinese competition that's causing all this. That completely misses the new reality in Germany and Europe. Germany's whole economy was primarily based on buying cheap natural gas from Russia which provided not just energy but chemical feedstock for their industrial sector. The war in Ukraine has brought the house of cards down, and Germans are finding that living standards have fallen drastically. The people who can afford to leave are leaving (mostly to the US) and that just exacerbates the problem. VW's primary market is getting the crap kicked out of it, and VW's going to feel the trickle-down effects of it.
Having been in Asia and having watched reviews on Asian automobile shows reviewing VW cars and comparing them to brands like BYD, Geely, SAIC Motors, Changan and CATL, I can tell you with complete certainty that what is crushing VW is not a lack of cheap Russian NatGas, that's just one of Putin's fever dreams. It is the fact that their cars look like an Nokia 3310 next to an iPhone 15 and the same goes for most Western legacy automakers including the US ones. Chinese motorists who have gotten used to getting software updates for their cars for free installed over a free mobile connection, just like their mobile phones, took one look at VW's offering where you had to take to a dealer and pay a guy to update it with a USB stick and they laughed their asses off. On top of that the Chinese cars have all kinds of whiz-bang features that either don't exist in the VW or, if the VW has them VW features sucks ass. VW is reaping the results of decades of mis-management by hidebound conservative top managers who bet the company on ICE engines being the future and put no real money and serious work into building the battery tech, next gen. automotive engineering, next gen. material science and software development capabilities they now find they desperately need. Meanwhile the Chinese were building all that stuff and now they are going to wreck anybody who didn't build these capabilities in time. What VW needs is (A) for the German Government and EU to provide them with a toll barrier defence against the incoming flood of cheap Chinese EVs and (B) gut their ICE motor vehicle development departments and re-build at warp speed the the battery tech, automotive engineering, material science and software development capabilities the thought the weren't' going to need because ICE was supposed to be the future.
Re:Energy? (Score:5, Interesting)
I agree with much of your analysis, but not quite all.
To be fair to VW, they did more than any other western legacy OEM in investing in EV tech, and they made a decent start with the id3 (despite the notorious software issues) at one end and the Taycan at the other. But — many in the senior team and much of the org never really bought into it; there was no large-scale, strategic government co-investment of the sort that Chinese OEMs enjoyed; and they weren’t able to move at pace to widen their appeal with EVs*, so when the first slowdown in EV growth came, VAG was especially hard hit and backed away quickly from its EV strategy despite having put more investment into it relative to other OEMs.
* For example, the Taycan went on sale in 2019, and it was outstanding at the time and commercially did very well. But five years on, and it’s only just had a refresh (albeit very impressive) and Porsche has only just brought out the Macan EV. I know this was deliberate, and actually represents Porsche working at pace, but that’s the problem - Chinese EVs are being launched and refreshed much faster than that.
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I agree with much of your analysis, but not quite all.
To be fair to VW, they did more than any other western legacy OEM in investing in EV tech, and they made a decent start with the id3 (despite the notorious software issues) at one end and the Taycan at the other. But — many in the senior team and much of the org never really bought into it; there was no large-scale, strategic government co-investment of the sort that Chinese OEMs enjoyed; and they weren’t able to move at pace to widen their appeal with EVs*, so when the first slowdown in EV growth came, VAG was especially hard hit and backed away quickly from its EV strategy despite having put more investment into it relative to other OEMs.
* For example, the Taycan went on sale in 2019, and it was outstanding at the time and commercially did very well. But five years on, and it’s only just had a refresh (albeit very impressive) and Porsche has only just brought out the Macan EV. I know this was deliberate, and actually represents Porsche working at pace, but that’s the problem - Chinese EVs are being launched and refreshed much faster than that.
Your first two sentences really say it all. A decent start isn't enough and far better and more sophisticated software than VW are currently capable of producing is essential going forward never mind the AI. Furthermore, that software had better actually work because a kernel panic at 150 kph on the autobahn is not acceptable. If VW had done ten or fifteen years ago what they are now finally accepting they have to do they might have had a decent chance at competing instead of preventing the ship from sinkin
Re: Energy? (Score:2)
If you think EVs will become common in africa, south asia or central and south america in the next 30 years then I want what you're smoking. Even in europe EV sales are slowing compared to ICEs.
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Re: Energy? (Score:2)
A lot of countries particularly in africa can barely keep the lights on for a day without a power cut. How will all these chinese EVs be charged genius even if they did have the money to build a charging network. You need to get out more.
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A lot of countries particularly in africa can barely keep the lights on for a day without a power cut. How will all these chinese EVs be charged genius even if they did have the money to build a charging network. You need to get out more.
If you think the African market is going to decide the fate of the collective US, European and Asian automobile industries you are the one who is smoking something.
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You think western and japanese car makers don't make any money selling to the 3rd world? Interesting. In which universe is this?
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LOL! Oh boy, you have no clue but thanks for the laughs!
Re: Energy? (Score:2)
VAG has had OTA updates in their vehicles for years now. Maybe not all, but certainly all Porsche, all Audi (AFAII), and most VWs. However, I'm not sure that I consider "online" vehicles to be a feature, frankly.
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It was just one example from the parent. The reality is from a tech perspective the Chinese cars are eating Europe's lunch. When I get out of my Chinese car and step into my friend's 3 year more recent ID.4 which was the same price, it feels like I am not only stepping back in time, but also feels like I'm going from a luxury car to mid level family utility vehicle. And that's before considering my car is faster, has better range, and a faster charging capacity.
That said the Chinese could learn a thing or t
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Don't forget the stupidity of their abandoning nuclear for wonderful things like foreign electricity and fossil
Gaseous lies? (Score:4)
No mention of the cost of energy doubling/tripling due to the destruction of Nord Stream pipeline.
Uh, how about under the category of self-inflicted, no mention of a massive conspiracy to lie about emissions that actually resulted in fines measured in billions, along with executive indictments. Not everyone can shoot themselves in the foot that good.
Re: Gaseous lies? (Score:2)
Electrify America was born from that scandal, and is owned mostly by VAG, so it would be ironic if that's their new cash cow. They're probably the best network around as far as performance, although I've spent just about enough time in Walmart parking lots for one lifetime at this point.
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The higher prices were due to the Kremlin reducing gas exports to Europe in an effort to drive prices higher and pressure European governments to stop supplying Ukraine with lethal aid.
Once the Kremlin raised prices by reducing flows, some unnamed government realized the following scenarios:
A) High gas prices, Russia has leverage over Europe
B) Destroy pipeline, high gas prices, Russia loses leverage over Europe
High prices were not due to the destruction of the pipeline.
The high prices were due to the Kremli
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And, the Nordstream 2 pipeline wasn't even in use when it was destroyed.
So no. Gas prices did not go up because somebody blew up an unused nat gas pipe.
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First of all, Nordstream 1 was also destroyed. And that one was being usedy except for the last two months of its existence, when putler tried to blackmail Germany to allow Nordstream 2 to go online.
Second, of course the prices went up because of that. The gas prices aren't dictated by the state, but by the free market. And the free marked decided to rise the prices since a large part of the supply went down and because of all the insecurities due to the whole situation. When alternative supply routes have
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The Kremlin cut flows of Nordstream 1 down to 20% of max capacity, and then completely under the guise of "maintenance". They would restart, and shut down, transport sporadically after that (also under the guise of maintenance) at the time Germany and the U.S. were bouncing the idea of sending tanks to Ukraine.
The order of events wasn't:
NG is cheap -> Kremlin shuts gas -> NG remains cheap -> pipes destroyed -> NG is expensive.
It was:
NG is cheap -> Kremlin shut gas -> NG is expensive ->
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What about the country that built it - won't they have the means to demolish it?
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No mention of the cost of energy doubling/tripling due to the destruction of Nord Stream pipeline.
Because a) the cost isn't double anymore, in fact it's only marginally higher than it was in 2018, and earlier this year it was actually lower than 2018 to say nothing of 2022. It is also quite stable with virtually all of 2023 having a gas price that was below double the pre-war effort.
and b) it has everything to do with the fact that Germany's exports to China have been decimated. VW used to be the biggest brand in China with just shy of 1/4 of the market share for cars. They were the biggest car company
Reanimate Ferdinand Piëch (Score:1)
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Costs (Score:5, Interesting)
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Yep. When I read that part I immediately disregarded the other points.
Don't blame China when your house is obviously not in order all on its own.
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Until someone came along and fired 80% of them, while remaining operational.
And reducing ad revenue to half what it was and the value of the company by more than half. Yes, it's absolutely a perfect template for success.
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It's a case of hoping to turn things around. VW did produce far more cars than Toyota on a yearly basis 10-15 years ago, and a large part of that was thanks to a very car hungry Chinese market. That market was decimated, along with the general opinion of VW after the diesel scandal.
It's refreshing to see a company not just hire and fire employees on the release of every quarterly report, but I agree with your sentiment that I don't see them turning this around.
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With their destruction of the Nordstream pipeline and the cheap source of Energy it was providing Germany with.
Let's not even pretend the Ukrainian patsy was responsible without authorisation from the U.S. or that Russia blew it up themselves. What kind of idiot even accepted that B.S.
Europe complains about what they call the 'migrant problem' - without realising that absolutely out of control Western foreign policy, regime change and wars for profit CREATED this 'migrant problem' - which is actually refugees escaping warzones and conflict.
Another case of the U.S. shits all over an area, and due to their physical isolation from the conflict zones other nations pay the price while the Arms merchants and their corrupt collaborators in U.S. politics profit.
Unaligned nations have have gotten fed up, now it's time for those completely compromised by U.S. interests to clean house of the Politicians who don't put their own nations First. Start with the evidence in the State Department files and work up.
If you think that the German Economy is doomed to certain destruction because the Nordstream Pipeline got blown up you are either a really bad troll or you need to get your head examined.
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Let's see your evidence for this.
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Let's see your evidence that it was anyone else.
Compete with devalued labor markets (Score:2)
VW (Score:3)
VW cars have not kept up in reliability with Japanese cars, nor even American cars. They deserve to go the way of the unlubricated bearing.
this is saddening (Score:2)
Should have gone all in on EVs (Score:4, Interesting)
But the wisdom of VW board kicked Diess out along with his drive to the new direction. VW's fate was written then, unless they can pull a rabbit out of a hat by cloning Rivian in Germany.
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He was right.
What Diess was trying to communicate was (Score:2)
or
b) there will be job cuts and we won't survive (if VW doesn't change.)
b) is coming to pass as he predicted.
But people irrationally tend to blame the bearer of bad news, so he is enjoying his retirement early. Maybe he is learning to play the fiddle (while VW burns).
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It's a shame because after some early issues with their software, VW EVs are actually decent.
Being years behind the Chinese it's hard to keep up with their drivetrain and battery tech though.
Here's the sell to to the VW board (Score:2)
VW had enough money for racist ads and EPA hacks (Score:2)
https://www.epa.gov/vw/learn-a... [epa.gov]
https://www.dailymail.co.uk/vi... [dailymail.co.uk]
https://www.youtube.com/watch?... [youtube.com]
Bloated (Score:1)
Embarassing (Score:2)
Look what happened in the 70's (Score:1)