German carmaker warns of stagnation in the European sector amid news of deeper-than-expected action
The German carmaker Volkswagen is planning to shut at least three factories in its home country, lay off thousands of workers and cut pay by 10%, according to the company’s union.
The deeper-than-expected cuts come as the company faces weak sales and slow expansion in the electric vehicle (EV) sector amid tough competition from Chinese manufacturers.
“The board wants to close at least three factories in Germany,” the works council chief, Daniela Cavallo, told employees at VW’s headquarters in Wolfsburg on Monday. Its remaining manufacturing sites will reduce capacity, she said, citing information provided by management.
As Europe’s top economy suffers a crisis in manufacturing and fears of mass unemployment, VW is aiming for a fundamental restructuring to cut costs. It had initially warned last month that it had the equivalent of two factories of extra capacity in Germany.
It should be highlighted that the tough competition from Chinese manufacturers is on the Chinese market. The increased tariffs won’t help on that. VW simply got outcompeted in China.
VW is still the most sold brand in Europe. Every time BYD sells one car in Europe, VW sells 74 cars Europe. That’s not the problem. It’s that the Chinese market used to be the largest market for VW, but now the party is over after 40 years.
Exports are risky like that. It’s difficult to blame the China for this when they have cheaper and more technology advanced vehicles available domestically. I hope VW can see the writing on the wall and up their game, but I fear that this market won’t ever come back. In my opinion they should focus on going back to the core idea of making smaller and cheaper cars available to the people, instead of making luxury car exports.