[RahulNagaraj]

According to media reports, Volkswagen, for the first time in its history, is considering closing down its factories in Germany, in a move to cut down costs.

The German automaker, one of the world's biggest car companies, released a statement mentioning that it did not rule out plant closures in its home country. In addition to this, the carmaker is also trying to terminate an employment protection agreement with the labour union - something which has been in place since 1994.



The move to cut down costs comes amidst the rising competition from Chinese brands. The company is also losing market share in China - its single biggest market.

Oliver Blume, CEO of Volkswagen Group, stated, "The European automotive industry is in a very demanding and serious situation. The economic environment became even tougher, and new competitors are entering the European market. Germany in particular as a manufacturing location is falling further behind in terms of competitiveness."

Blume told analysts, "Our main area of action is cost cutting. We have done all the organizational steps needed. And now it is about costs, costs and costs."

However, reports state that Volkswagen's plan to cut costs would face heavy resistance from labour representatives, who hold half the seats in the company's supervisory board. Thorsten Groeger, lead negotiator of IG Metall - one of Germany's most powerful unions, stated, "Today, the board presented an irresponsible plan that shakes the very foundations of Volkswagen, massively threatening jobs and locations."

He added, "This approach is not only short-sighted but also highly dangerous — it risks destroying the heart of Volkswagen… We will not tolerate plans that the company makes at the expense of the workforce."

Source: CNN

Link to Team-BHP news

[JunkyardHunter]

Let's take a look at some statistics about one of the plants that would be affected by this - The Wolfsburg plant.

This plant is - according to an article by MotorOctane - is the single biggest ca manufacturing facility in the world. It is also the oldest VW factory, founded in 1945.

As of 2019, Wolfsburg has a population of about 1.29 lakh. And in mid 2023, the plant employed 61,880 people - that's almost 50%! (49.9 to be exact).

Shutting this plant down will likely cause unemployment for almost half the population and will get rid of the tons biggest industry.

This sounds like, in my opinion, a monumentally stupid move by VW.

Sources - MotorOctane, Wikipedia, VW Newsroom.

[avira_tk]

The fallout of ev mandates, looks like the workers will pay the price for management decisions driven by virtue signaling.

[ZenMaster]

This is a result of VW's over-reaction to the diesel gate scandal and virtue signaling by OEM managements across Europe to "Electrify their lineup" by 2030 which is also partially forced by the highly stringent upcoming Euro-7 regulations. Add to that VWs flopped EV design with the horrible interior tech - it was meant to be disaster.

In the coming years, if the highly stringent environmental/safety regulations are to be adhered to, cars will have to start becoming more and more unaffordable to the common man. You can't entirely blame OEMs because their challenge is to provide cars that are 5x safe, and 5x more efficient than cars 20 years ago with 100x more features and technology at the same cost (it’s a tight line, especially once you adjust old car prices for inflation).

The income of the average customer have not kept pace with the increase in costs that regulations from the govt. , environmental targets of activists, and the customer 's own expectations of premium and tech features bring about.

Sure, OEMs are making huge sales as compared to before, but a majority of that is supported by credit, and market growth in countries like India and not the everfalling disposable income of people on a global scale.

I am no fan of R.C Bhargava's comments justifying Maruti's low safety cars, but if made in the right context he is right when he says that too much technology and safety will make cars unaffordable to the common man. All the ADAS tech, electrification goals and CAFÉ C02 targets that govts. across the world are blindly mandating may surely achieve the stated goals of safety and reduced emissions and virtue signaling/ESG goals, but it is surely is going to pinch the customers pocket in the end.

Maybe people will start cycling and walking again and it will turn out to be a big win-win for the health of the people, govts and the environment.

[TheStoryweaver]

This is a big topic for discussion for auto enthusiasts as well as other automotive brands. A few pointers as per the different reports I have read are:
1) Slowdown in economy.
2) Enhanced competition. The Chinese are a step ahead and taking advantage of their EV prowess. India, US, Canada, and certain European countries have imposed anti-dumping duty to protect their automotive industries.
3) Taking cost-cutting measures without considering workforce status. For cost benefit, the first route is usually cost-cutting rather than exploring other options. As per the reports, this seems to be the current scenario taken by the board at the VW, which will definitely be met with strong opposition and probably be overturned.

I won't disregard Chinese EVs being more competent with better battery tech and certain more tech-related equipment, and every company is allowed to compete as per the rules of free trade.

But Chinese are notorious to dump products at significantly cheaper costs, destroying the local markets and later creating monopolistic situations. Chinese government . has certain stake in the EV companies operating at present. Many articles have covered this information.

Indian auto industry is protected from Chinese EV dumping at present but needs smart investments and decision making to keep up with changing market trends and changing demand patterns.

It's a big transition time in industry and needs smart decision-making to balance the company's revenue while keeping up with market trends.

[AMG Power]

If VW leaves Germany for the stated reasons, Mercedes and BMW can’t be too far behind. Economic cycles have their way. Sad for us enthusiasts.

[Turbanator]

The ‘glory days’ for global automakers in China are over

This article was published in CNN, and unlike other articles, this looks well researched (reminded me of our member pqr)

The German car giant has seen its deliveries in China, its single largest market, tumble by more than a quarter from just three years ago to 1.34 million in the first half of this year. And last year, the company lost its crown as China’s biggest-selling car brand to BYD, shedding title it had held since at least 2000.

In July, foreign carmakers’ share of auto sales in China slipped to 33% from 53% in the same month two years earlier, according to data from the China Passenger Car Association (CPCA).



https://edition.cnn.com/2024/09/03/c...ntl/index.html

[SmartCat]

Meanwhile, VW top management seems to be drinking stupid cola. Shutdown plants in Germany but express concerns about EU tariffs on Chinese imports.

VW rejects 'detrimental' EU tariffs on electric cars from China
"Countervailing duties are generally not suitable for strengthening competitiveness of the European automotive industry in the long term." https://energy.economictimes.indiati...hina/111487878

I think this happens because the top management has no stake in long term future of these companies. All they care about is their individual tenure.

[SKC-auto]

There is no future for these foreign automakers in China, their share will reach 0%.

VW did not change fast, still no EVs in India, no affordable EVs like BYD seagull. Their id2 is still 2 years from production.

Their new software on EVs is a failure, lots of bugs, I think you still cannot navigate with multiple charging stops using the onboard navigation.

Chinese are simply adding a small ICE engine to an existing EV platforms (PHEV) to bypass EU taxes. There is no way to get rid of the Chinese.

Herbert Diess wanted to turn the company's direction, but sadly booted out.

As said above, Oliver Blume will leave this organization in mess, takes his share and leaves.

[manojrajakrishn]

Every business is evaluating its running costs and optimizing the current business based on market share and profitability, this is not just limited to Automobiles. We see this in all Industries.

This trend is believed to continue till mid next year due to various factors.

The disappointing fact is a major player that produces quality cars planning to do this for cost optimisation.

When Virtus and Taigun have started doing well in India recently this news comes as a letdown for car enthusiasts

[AMG Power]

Originally Posted by SmartCat

I think this happens because the top management has no stake in long term future of these companies. All they care about is their individual tenure.

True.

I had mentioned this exact point when VW announced details of their India 2.0 program; now proven true. The India 2.0 plan was a DOA. No diesels, reduction in build quality, half baked engines developed without too much R&D, poor handling, reduced high speed stability, poor finish but with a sun roof to make up for it.

However with the recent moves, the India 2.0 plan looks like a stroke of genius. Now they import the same Superb price it about 20 lakhs higher, bring in a model that is out of production and hope it will sell.

And if that were not enough, the new Octavia comes with a smaller engine (a la the 1.4 TSI disaster with Audi), less power, bigger body, awful handling and expect that to sell too.

I am reminded of how Honda killed itself. Skoda seems to be taking automotive management lessons from Honda.

All of these moves seem to be to impress the VW top bosses (who have no idea of the Indian market other than it is cost sensitive so lets do everything to reduce costs) whilst the real motive is to secure a lifeline for the management to continue in office for some more time rather than the projected intention to sell cars.

And if all of the above weren’t enough they now want to sell out to Mahindra - most probably a suggestion based on an informal arrangement with Mahindra to protect the tenure of the Indian management yet again.

[tbppjpr]

Originally Posted by AMG Power

- most probably a suggestion based on an informal arrangement with Mahindra to protect the tenure of the Indian management yet again.

VAG-Mahindra venture is more important for Mahindra than VAG. Mahindra has presence only in the diesel segment but with the recent pressure from the govt, they need some backup plan in the petrol and alternative fuel.

VAG isn't investing in diesel due to uncertainties all over the world. Indian govt policies are getting way too much confusing for the manufacturers as well for the buyers. Anyone having their brain in the right place will hold their new investment plans in such uncertain and confusing scenario.

For the time being VAG wants to join hands with someone who has some govt lobbying power, has strong presence in diesel and also has some electric tech so that they do not have to risk their investments to start from the zero in the EV segment in India. Its nothing new, Maruti had technological partnership with Fiat for very long, Tata still has.

This VAG-Mahindra JV is similar like Maruti-Toyota where neither of them want to risk heavy investments in diesel and petrol segments respectively until the govt policies are clear, but since they want to keep their dealerships running in profits, they need some cars available on sell hence co-sharing the cars models with each other.

Even car users like me have postponed car upgrade plans for atleast 5-7 years and have been advising same in the family and friend circle until there is clarity that my car will remain my car as long as I want to keep it, not like the current scenario when govt can snatch it from me anytime they want.

I also want to make sure that I get pure fuel, not the adulterated garbage in the name of E10, E20, biodiesel and all which are reducing the FE and resulting into increased crude import. Such fuel is also adversely affecting the engine life but no one will ever be able to know about this huge scam because the cars are being scrapped prematurely in India, thanks to the unlawful govt laws.

No one can have interest of doing business in such scenarios.

[speedguy]

Originally Posted by tbppjpr

Even car users like me have postponed car upgrade plans for atleast 5-7 years and have been advising same in the family and friend circle until there is clarity that my car will remain my car as long as I want to keep it, not like the current scenario when govt can snatch it from me anytime they want.

Can you please explain this point? I've not heard or came across such rule that govt can snatch my car whenever they want. If this is true, it is concerning to say the least.

[gauravanekar]

Originally Posted by avira_tk

The fallout of ev mandates, looks like the workers will pay the price for management decisions driven by virtue signaling.

I dont how it works in Germany but I am guessing the same set of workers voted for Socialist parties who leaned heavily on EVs.

[tbppjpr]

Originally Posted by speedguy

Can you please explain this point? I've not heard or came across such rule that govt can snatch my car whenever they want. If this is true, it is concerning to say the least.

It's not just one of a case, just the one reported here out of many:

My diesel car crossed the 10-year mark | MCD seizes & tows away the car to a scrapping agency