Volkswagen May Close Factories In Europe: ‘It’s A Catastrophe’

Volkswagen responded to the Dieselgate scandal with an aggressive EV push. But that’s not going well and now it’s considering plant closures.

VW Plant Closure CM 9/3 VW Plant Closure CM 9/3
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Volkswagen was a key driver of Germany’s post-war economic rise. With the Beetle, Golf, Type 2 bus and many successful models later, the brand cemented its legacy as a household nameplate and a global automotive leader. But in the electric vehicle era, things aren’t going as planned. VW factories once considered sacred in its home country now risk closure as its EV plans fail to take off against China and Tesla.

This kicks off today’s edition of Critical Materials, your daily round-up of news and events shaping up the world of EVs. Also on today’s dance card: Tesla will apparently introduce the Robotaxi at a Warner Bros. Discovery’s movie studio in Los Angeles, and how Honda’s decades old bet on hybrids is paying off while Nissan is losing ground.

30%: Historic VW Plant Closures May Rattle Europe

Volkswagen is considering shutting down a car plant and a components factory in Germany, its works council said today. The automaker has struggled to keep pace with the EV industry where Chinese automakers and Tesla have a considerable lead over legacy carmakers.

VW is also considering ending a three-decade-old job security program that protects workers from layoffs at several plants. VW CEO Oliver Blume is also fighting the powerful IG Metall union whose leader Daniela Cavallo said it would "fiercely oppose" VW’s plans to shut plants, Reuters reported.

Here’s more from the news wire:

Analysts have in the past named VW sites in Osnabrueck, in Lower Saxony and Dresden, in Saxony, as potential targets for closure. The state of Lower Saxony is Volkswagen's second-largest shareholder and on Monday supported its review.

VW, which drives most of Volkswagen's unit sales, is the first of its brands to undergo a cost-cutting drive targeting 10 billion euros ($11 billion) in savings by 2026 as it attempts to streamline spending to survive the transition to electric cars.

It faces a challenging landscape of challenges in Europe, the U.S. and especially China, where domestic EV makers led by BYD, opens new tab are grabbing its market share. It has lost more stock value than any major competitor over the past two years.

One VW worker and a chief negotiator quoted by Bloomberg said the group's EV production plans had “turned into a catastrophe.” That’s especially true of the Audi Q8 E-Tron, whose production may end early as the automaker’s plans to permanently shut down the Brussels plant where it is built.

The shift to EVs was supposed to open a new chapter for Volkswagen, but it has faced sales and software nightmares so far. It’s not in its best shape in the U.S., either. The long-awaited ID. Buzz starts at $60,000 before taxes and fees and the maximum range on the rear-wheel-drive trim is just 234 miles. VW has also indefinitely postponed the ID.7.

Sure the cheaper VW EVs may arrive, but that won't happen until later this decade. That means Volkswagen doesn’t really have anything exciting coming in the near future whereas Ford, Tesla, Kia and GM have a rush of EVs scheduled to debut in 2025 and 2026. Ford, Kia and GM also have more successful internal combustion product lines in the U.S., which are helping to bankroll their EV plans. With Europe being less profitable, China collapsing and a still-small footprint in the U.S., VW doesn't have that sort of luxury.

Plant closures are a problem for more than VW. Not only do they result in thousands of workers losing their jobs but also threaten to desert the towns and cities that were built around them. Negotiations are still underway, but the question looms large: Will other automakers follow Volkswagen and trigger a wave of plant closures as everyone scrambles to cut costs and compete with China?

60%: Tesla Robotaxi Reveal May Feature Some Hollywood Funk

Tesla will unveil the highly anticipated Robotaxi on October 10. Sources told Automotive News that the unveiling will take place at the Warner Bros. Discovery movie studio in the Los Angeles area. The studio, located in Burbank, is a historic film and television production set where iconic TV shows like Friends and films like Batman were shot.

The robotaxi was supposed to be revealed in August, but was delayed as Tesla needed more time to create prototypes for demonstration, the publication said.

Tesla is by far the best-selling EV brand in the U.S. but its market share has been declining this year. Its model lineup is aging and rivals like General Motors and Hyundai Motor Group are starting to catch up.

But CEO Elon Musk wants to transform the brand from a car company to one that masters artificial intelligence, robotaxis and humanoid robots.

The robotaxi event would be a huge opportunity for Tesla to showcase what it has been working on. If the tech holds to Musk's claims, it may help the company regain some of its lost momentum. But if it's another far-off promise, it won't do much to help Tesla's core business now.

90%: Honda Hybrids Are Having A Moment

The trend seems counterintuitive. As automakers worldwide prepare to go fully electric and develop so-called "software-defined cars," a technology that's decades old is making a strong comeback: hybrids. Besides Toyota, Honda is also riding this wave.

Fifty two percent of Honda CR-Vs sold in June were hybrids. And a shade over 50% of Accord sales were also hybrid. For either model, you have to go hybrid if you want the top-trim version. Honda's overall electrified U.S. sales are still down compared to the last year by about 2.3%, but the hybrid trims of its most popular cars are now finding more homes than before.

As Automotive News points out, the brands without hybrids are missing out on this surge. Nissan, which championed fully-electric cars with the launch of the Leaf in 2010 in the U.S. will get its first proper hybrid of the modern era later this decade with the next-generation Rogue.

It may be losing out on this wave, especially given how bad its financials look. Its profits plummeted 99% between April and June. Americans are no longer buying Nissans as they once did.

Sure, it has plans to launch hybrids and fully-electric models in the future—but hybrids are in vogue right now, they may not be in the future. Nissan and it's alliance partner Mitsubishi were clearly caught off-guard in this EV battle.

100%: How Can European Carmakers Survive?

It's quite a conundrum. On one hand, the EU has levied hefty tariffs on cheap Chinese imports. But many European countries are trying to entice Chinese investments to bring jobs and economic growth to their respective regions.

But the tariffs may have come a little too late. Volkswagen and Stellantis have already been jolted by how this EV game is panning out. Apart from acing software and building affordable models, what else should they do to recover? Leave your thoughts in the comments.

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