According to Xinhua News Agency, Volkswagen Group released a statement on the 2nd stating that the company is considering closing its first car manufacturing plant and a parts factory in Germany. If the plan is implemented, it will be the first time in Volkswagen's history that a factory will be closed in Germany.
The profit margin of the Volkswagen passenger car brand has been sluggish for a long time, and the company hopes to improve its financial situation by reducing costs. The overall environment has become more severe, and Germany is gradually falling behind in terms of competitiveness, "said Obomu, Chairman of the Board of Management of Volkswagen Group, in a statement
At present, Volkswagen has approximately 650000 employees worldwide, of which nearly 300000 are in Germany.
Previously, according to Agence France Presse on July 9th, Audi announced that it is considering closing its electric vehicle factory in Brussels due to a decline in global demand for high-end electric vehicles.
Earlier in December 2023, Volkswagen Group announced that it would launch a "cost cutting" campaign and hoped to save the company 10 billion euros in costs by 2026 by accelerating product development and production speed, reducing employee costs, and implementing more efficient procurement strategies, and driving profit margins from 3.4% to 6.5%.
In contrast, Volkswagen Group has made frequent investments in China.
In 2023, Volkswagen Group will relocate its largest research and development center outside of its headquarters in Germany to Hefei.
On April 11, 2024, Volkswagen Group (China) announced an investment of 2.5 billion euros to further expand its production and innovation center in Hefei, Anhui, strengthen local research and development capabilities, and accelerate the production of two Volkswagen brand intelligent electric models jointly developed by the group and Xiaopeng Motors.
Volkswagen considers closing German factory for the first time
According to CCTV News, Volkswagen Group issued a statement on September 2nd local time, stating that the company is considering closing its first car manufacturing plant and a parts factory in Germany, and terminating the employment protection agreement implemented since 1994 to further reduce expenses.
The profit margin of the Volkswagen passenger car brand has been sluggish for a long time, and the company hopes to improve its financial situation by reducing costs. However, in the process of transitioning to electric vehicles, consumer spending has slowed down and cost reduction has become more difficult. The overall environment has become more severe, and Germany is gradually falling behind in terms of competitiveness, "said Obomu, Chairman of the Board of Management of Volkswagen Group, in a statement
At present, Volkswagen has approximately 650000 employees worldwide, of which nearly 300000 are in Germany. If the closure plan is implemented, it will be the first time in Volkswagen's history to close a factory in Germany, which may lead to conflicts with Volkswagen's labor management committee. Daniela Cavallo, the chairman of Volkswagen's labor management committee, stated that the committee will "strongly oppose" the board's proposal.
Previously, citing Agence France Presse on July 9th, German luxury car manufacturer Audi announced that it is considering closing its electric vehicle factory in Brussels due to a decline in global demand for high-end electric vehicles.
The car manufacturer (whose parent company is Volkswagen Group) has stated that it is considering "early termination" of production of the Q8 e-tron model at this factory. The company stated in a statement that the management is discussing a solution for the (Brussels) factory, and if no alternative solution is found, the solution may include ceasing operations.
Audi has approximately 3000 employees at its electric vehicle factory in Brussels. Audi stated that the reason for making this change is "a decrease in customer orders for luxury electric vehicles worldwide".
After investing heavily in the transition to electric vehicles in recent years, car manufacturers have been hit hard by the slowdown in demand for electric vehicles.
Volkswagen Group (which owns 10 brands including Porsche, SEAT, and Skoda) stated that closing its Brussels factory or finding alternative uses for it, as well as other unplanned expenses, will have an impact on its performance for the 2024 fiscal year, involving an amount of up to 2.6 billion euros (approximately 2.8 billion US dollars).
Therefore, this automotive giant has lowered its expected operating return rate for this year from the previous 7.0% to 7.5% to 6.5% to 7.0%.
In addition to the slowdown in demand for electric vehicles, Audi also mentioned the "long-term structural challenges" faced by its Brussels factory, including difficulty in changing factory layout and high logistics costs.
Audi has stated that they will currently engage in discussions regarding the next steps to be taken.
The announcement of this intention does not mean that the company has made a decision, "said Volker Gelman, CEO of Audi in Brussels." However, this news has had a significant impact on the employees of the Brussels factory
Rita Beck, spokesperson for the Audi Committee of the European Volkswagen Group's labor management committee, said that Audi employee representatives are "calling for long-term development prospects for this factory and our colleagues in Brussels. Audi management must be responsible for this factory.
In the first quarter of this year, Volkswagen's profits decreased by over 20% due to a decline in sales of high priced models, including Audi.
Volkswagen launches' throttling 'plan, aiming to reduce costs by 10 billion euros
In December 2023, according to China Economic Net citing "European Automotive News", Volkswagen Group announced in a statement on Tuesday (December 20, 2023) that the company will launch a "cost saving" campaign and hopes to save 10 billion euros in costs for the company by 2026, and increase the profit margin from 3.4% to 6.5%.
Specifically, Volkswagen's cost cutting measures include accelerating product development and production speed, reducing employee costs, and implementing more efficient procurement strategies.
Among them, Volkswagen plans to save 200 million euros annually by shortening vehicle production time; By reducing the number of test vehicles used in development by 50% and conducting testing through digital simulation methods, we can save 400 million euros annually; By improving procurement efficiency, saving 320 million euros annually; By optimizing after-sales services, we can save 250 million euros annually.
Volkswagen stated that, overall, the cost cutting measures mentioned above will bring a positive contribution of approximately 4 billion euros to the company's performance in 2024.
Previously, Gunnar Kilian, a member of the management board and head of human resources at Volkswagen Group, stated that if necessary, a company wide "downsizing" action may be initiated, including signing selective contract termination agreements with employees, which do not violate the regulations of the Labor Committee.
As the first Volkswagen brand to launch a cost reduction plan, it has previously released relevant information to its employees: Volkswagen's administrative staff costs need to be reduced by one-fifth; By 2028, the product development cycle needs to be shortened from 50 months to 36 months, thereby saving 1 billion euros in costs; In addition, the plan to invest 800 million euros to establish a new research and development base in the "hometown" of Wolfsburg may also be cancelled.
At present, Volkswagen has suspended recruitment in Europe, laid off some temporary workers, and reduced production shifts in German factories. The above plan is made because Volkswagen is facing numerous challenges. Oliver Blume, CEO of Volkswagen, previously stated that the brand's revenue and profit margins urgently need to be improved; However, the market demand for electric vehicles and the company's own performance have been weaker than expected, making achieving the goal challenging. Especially in the Chinese market, facing the strong impact of new energy companies such as BYD, Volkswagen's market leading advantage no longer exists.
European electric vehicle sales are experiencing a downturn
According to the website of the Spanish newspaper El Pais on August 14th, European car manufacturers have invested billions of euros to change the entire European car production chain, but the sales of various brands of electric vehicles have not shown any improvement. According to data from the German Association of Automobile Manufacturers, as the largest market share in the European automobile market (with the cancellation of electric vehicle purchase subsidies by the end of 2023), electric vehicle sales in July decreased by 37% year-on-year, and sales so far this year have decreased by 20% year-on-year. The share of pure electric vehicles in the German automotive market is currently 12.6%. The European Automobile Manufacturers Association estimates that as of June this year, the market share of electric vehicles in the entire EU has decreased by one percentage point year-on-year.
This situation is endangering billions of euros worth of investment in the entire industry, such as Volkswagen Group's investment in Spain, as a large portion of the cars produced here are exported to Germany. In Spain, Volkswagen is raising approximately 10 billion euros with its industry partners to electrify the company's car production in Spain and build a battery factory in Sagento, Valencia.
I am very worried every day when I go to the factory in Martorel. We have invested 300 million euros to build a battery assembly plant there, which will be put into operation next year. But I see that currently in Spain, the market share of electric vehicles is only about 5%. Fortunately, we still have a gasoline car product line, and we need to continue investing in it. We must invest in the world today and the future, "said Wayne Griffiths, CEO of SEAT and Kupra brands, at a conference organized by the Spanish newspaper El Pais in April this year.
German media: German industrial export model faces challenges
On August 30th, the German foreign policy website published an article titled "The End of Germany's Export Model". The full text is excerpted as follows:
Economists warn that German industry is facing a 'Chinese shock'. The reason is that more and more German companies are not only losing to Chinese competitors in the Chinese market, but also facing the risk of falling behind Chinese companies in other export markets. This applies to the three most important industries in Germany. For example, German car companies lag behind their Chinese competitors in electric vehicles; The development of German machinery manufacturers in China has stagnated, and they also have to face the increasing strength of Chinese manufacturers in the third-party market; The chemical industry is also weakening, coupled with the impact of rising natural gas prices, making it difficult for German companies to keep up with Chinese companies, especially in the field of basic chemical products. Experts explain that they are concerned about the "German export model" because German companies often cannot keep up with Chinese companies in the sales market.
The important component of the German chemical industry is facing increasing pressure. According to the Business Daily, this is particularly applicable to basic chemical products, such as plastic production materials such as polypropylene and polyethylene. On the one hand, the reason is the rise in natural gas prices; On the other hand, it is worth noting that China's production has significantly increased.
It is now clear that China's chemical products are more cost-effective and are taking away market share from more expensive German companies' products - the same is true in Europe. From 2017 to 2023, the import volume of chemical products in the European Union increased from 107 billion euros to 238 billion euros, with the proportion from China growing rapidly. The share of basic chemical products in imports has increased significantly. In Europe, the profit margins of basic chemical product manufacturers are currently declining. For example, BASF has already closed some factories, and it is reported that "more factories are facing closure" now. The United Nations International Industrial Research Centre stated that nearly 40 basic chemical product bases worldwide are about to close or have already closed, with a clear focus on Europe, with over half of the bases located in the European Union and the United Kingdom.
The second largest industrial sector in Germany, machinery manufacturing, is also facing increasing difficulties, and this sector has long been one of the biggest beneficiaries of doing business with China. So far, China is the second largest export market for German machinery manufacturers. However, since 2018, the total value of German machinery and equipment sold to China has remained stagnant at around 19 billion euros per year, while the strength of Chinese machinery manufacturers continues to grow.
Karl Hoysgen, President of the German Machinery Equipment Manufacturing Association, explained that Chinese machinery manufacturers have established "enormous production capacity" - the huge Chinese market makes this possible. In the long run, this enables them to conquer international markets through exports. Not only in China, but also in third-party markets, they are increasingly becoming dangerous competitors for German machinery manufacturers. Hoysgen warned that the German machinery manufacturing industry can no longer afford price wars in the less important third markets and may have to "completely abandon these markets".
Due to the increase in exports from Chinese companies, German industry is suffering increasing losses in the export market. For example, Germany's market share in global industrial equipment exports decreased from 16% in 2013 to 15.2% in 2023, while China's share increased from 14.3% to 22.1% during the same period. In 2013, Germany's share of global automobile exports was 22.3%, but by 2023 it will only be 20.7%, while China's share has grown from almost zero to 9%, with electric vehicles showing a rapid growth trend. The automotive industry is the most important industrial sector in Germany, leading the machinery manufacturing and chemical industries, but its sales have decreased due to competition from China. Given that Germany's export share in the three major industries is shrinking while China's share is growing, observers are now discussing a comprehensive 'China shock'.
In order to at least ensure the market share of the German and European automotive industries within the EU, the European Commission is currently preparing to impose punitive tariffs on electric vehicles imported from China. However, even if this successfully stabilizes the market share of German and European industries in their own countries, the problem still exists: China's advantage in third-party markets. According to Noah Barkin, an expert at Rongding Consulting in the United States, there is no political panacea that can ensure the competitiveness of German companies in third-party markets. German companies face the danger of being squeezed out of many such markets in just a few years.
Rolf Langhammer, an expert at the Kiel Institute for World Economic Research in Germany, recently admitted, "We are concerned about Germany's export model. It cannot be ruled out that the model we have known in the past will come to an end in the coming years
Volkswagen's frequent investment actions in China
In contrast to considering the closure of a German factory for the first time, Volkswagen Group has made frequent investment moves in China.
Investing 1 billion euros in China for the development of pure electric vehicles
On April 18, 2023, Volkswagen Group announced plans to invest approximately 1 billion euros to establish a research and development, innovation, and component procurement center for pure electric intelligent connected vehicles in Hefei, Anhui Province, China.
Volkswagen Group announced in a press release on the same day that the center will be committed to integrating the research and procurement of vehicles and components, integrating advanced technologies from local Chinese suppliers into the automotive development process. It is expected to shorten the development time of new products and technologies by about 30%, in order to meet the needs of Chinese consumers more quickly.
Continue to invest 2.5 billion euros to strengthen domestic research and development in China
Volkswagen Group (China) announced on April 11, 2024, an investment of 2.5 billion euros to further expand its production and innovation center in Hefei, Anhui, strengthen local research and development capabilities, and accelerate the production of two Volkswagen brand intelligent electric vehicle models jointly developed by the group and Xiaopeng Motors.
Volkswagen Group's R&D center in China welcomes new progress
As the largest research and development center of Volkswagen Group outside of Germany, Volkswagen (China) Technology Co., Ltd. held a groundbreaking ceremony for the third phase of the project and the opening of the urban testing track in Hefei, Anhui on May 16th, further strengthening its local research and development capabilities.
It is reported that the third phase project covers an area of about 110000 square meters and will be completed in 2027. The experimental workshop will be put into use in 2025 to enhance research and development capabilities through a series of cutting-edge facilities. The expanded R&D center will carry out research and development work on new energy vehicle platforms, complete vehicles, components, software and hardware integration, and testing, focusing on building a local automotive R&D industry chain software and hardware ecosystem.
The urban testing track focuses on performance testing and functional verification of intelligent connected vehicles, and is Volkswagen Group's first testing site of this type in China. The total area of the test track is nearly 200000 square meters, of which the experimental road area accounts for 70%, covering a series of testing facilities and road sections. After being put into use, R&D engineers can conduct real-time testing and adjustment of the developing vehicle models, accelerating the iteration speed of software and hardware application development.
The commencement of the third phase project and the opening of the urban test track are significant milestones. The urban test track will soon be used to test the technology and applications of new vehicle models, and the third phase project will further enhance our future localization decision-making capabilities for research and development, "said Wu Borui, CEO of Volkswagen (China) Technology Co., Ltd.
Volkswagen (China) Technology Co., Ltd. was officially put into operation in January 2024, with a total investment of approximately 1 billion euros. In recent years, including the company itself, Volkswagen Group has established a new intelligent connected electric vehicle center in Hefei, covering the entire value chain from research and development to production, sales, and service.
British media: Volkswagen sees strong growth in electric vehicle deliveries in China in the first quarter
According to Xinhua News Agency citing a report from the Financial Times website in April 2024, Volkswagen Group saw strong growth in the delivery of electric and internal combustion engine vehicles in China in the first quarter.
According to a report from Volkswagen Group, the company delivered 694000 vehicles in China in the first quarter of this year, a year-on-year increase of nearly 8%, with a significant increase of 91% in the delivery of electric vehicles.
Ralph Brandstedt, Chairman and CEO of Volkswagen Group (China), said that Volkswagen Group's strategy in the Chinese electric vehicle market is taking effect. He stated that while the delivery volume of electric vehicles by the group is rapidly increasing, the market share of internal combustion engine vehicles in China is also growing.
At the same time, as Germany reduces consumer subsidies and consumer demand for electric vehicles tends to stagnate, Volkswagen Group's electric vehicle deliveries in Europe dropped significantly by nearly a quarter in the first quarter of this year.
The report also shows that globally, Volkswagen Group has delivered 2.1 million vehicles this year, an increase of 3%, with the most significant growth in the Chinese and American markets.
Foreign media: German companies investing in China 'more than ever before'
According to the website of Radio France Internationale on August 14th, the French newspaper "Le Figaro" published an article on August 13th stating that German manufacturers, especially German car manufacturers, hope to expand their production in China to defend their market share. German companies are investing more in China than ever before.
According to reports, Volkswagen Germany announced in April that it will invest 2.5 billion euros to expand its production and innovation center in Hefei, China; BMW Germany will invest an equal amount of funds in its Shenyang factory. The Figaro newspaper stated that despite the ongoing trade dispute between Europe and China, German industrial entrepreneurs are more reliant on China than ever before. According to data from the German central bank, China accounted for 29% of Germany's direct investment in the automotive sector in 2023; China accounts for 13% of direct investment in the machine tool industry; China accounts for 8% of direct investment in the chemical industry.
According to reports, this trend has not weakened. According to data provided by the German central bank to the Financial Times, Germany's direct investment in China in the first half of 2024 was higher than the entire year of 2023.
The report states that neither the new geopolitical tensions nor the EU's efforts to restrict imports from China have stopped German manufacturers. Even the Berlin authorities' desire to reduce Beijing's influence in their economy has not slowed down German manufacturers.