Insufficient Demand Affects Production At Volkswagen Zwickau Plant

The Volkswagen Group has a demand problem for its all-electric cars in Europe, which soon might affect its main factory in Zwickau, Germany.

According to German media – Handelsblatt and Automobilwoche (via Reuters) – the weakened demand, combined with reduced subsidies, higher inflation, and competition from Tesla and Chinese imports, might translate into a reduction of production and employment.

Let’s recall that the factory in Zwickau is one of Volkswagen’s flagship projects. The company transformed a factory for internal combustion engine cars into a 100% all-electric car production site. The original plan was to maintain employment from the ICE era through an increase of all-electric car production capacity to 330,000 (BEVs are simpler to assemble and thus the higher volume was necessary to maintain the employment).

The transformation was initially successful and six MEB-based models entered production at the site:

  • two hatchbacks: Volkswagen ID.3 and Cupra Born
  • two crossover/SUVs: Volkswagen ID.4 and Audi Q4 e-tron
  • two crossover/SUVs (coupe style): Volkswagen ID.5 and Audi Q4 Sportback e-tron

The production volume reached a record of 7,100 units per week (five workdays) in November 2022 and even increased to 7,300 per week in March 2023.

However, market conditions worsened. According to Reuters, the company’s spokesperson confirmed that some of the employees on limited contracts will not find permanent employment, which was initially planned. In other words, the workforce will be reduced. The automaker stated: “Volkswagen continues to be 100% convinced of the path to electromobility … however, in light of the current market conditions we can not extend 269 contracts which will run out shortly after a 12-month duration.”

Other articles say that a few hundred jobs out of 10,700 in total might be affected as soon as October.

This is not the first time we heard about demand issues. Previously, we heard about the postponed launch of the third shift at the Emden site in Germany, which is the second production site for the Volkswagen ID.4 in Germany. Reportedly, the move also affected the launch of the ID.7 at the site.

If we connect the dots with the recent European Union’s move to investigate import of the Chinese electric cars, an interesting picture is emerging. The automotive industry in Europe probably acknowledges its difficult situation and is trying to figure out what to do.

Sources: Reuters, Handelsblatt, Automobilwoche

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