German carmaker Volkswagen is struggling over a collapse in sales of electric vehicles, with the future of the giant motor manufacturer “at stake”, according to its chief.
The VW CEO Thomas Schäfer didn’t pull his punches as he spoke to an online meeting on July 17. “The roof is on fire,” he told more than 2,000 company managers.
The business is “under tremendous pressure from internal and external factors”, he said, saying that the firm, one of Europe’s biggest automakers, is heading into a serious crisis. Spiegel warned that: “The future of the VW brand is at stake.”
Since April 2021, the value of VW shares has fallen by half to €123.
Many observers say the company’s troubles are rooted in the decline of the EV sector in VW’s home country. In February, the sales of EVs plummeted by 83 per cent after the German Government cut its generous subsidy arrangements. While sales have picked up slightly in recent months, that has made little difference to Volkswagen’s bottom line.
Schäfer cited other factors that were also causing VW a serious headache, pointing to rising inflation and soaring energy prices in Germany. Those are hitting consumers hard and have resulted in a deflated domestic EV market.
“The next weeks and months will be very tough,” Schäfer warned, adding the current business environment represented a “perfect storm” for the company.
The VW board, meanwhile, added: “We have allowed costs to escalate in many areas,” and said that its EV-manufacturing processes are “still too complex, too slow, and too inflexible”.
Factories and production lines dedicated to making EVs cannot be changed to make other cars at a moment’s notice, the company said, meaning it is stuck making more than it can sell.
Clean Energy Wire reported that of the 97,000 EVs manufactured by VW between January and May this year, only 73,000 of them were sold, while the demand for some battery-powered models had fallen “to zero”.
Adding to its woes, the company is also unable to beat off competition from Tesla and Chinese EV makers. Referring to recent price cuts made by Tesla, Volkswagen company insiders told the German media outlet Handelsblatt that “the development is fatal”.
VW’s dire predicament comes as Germany as a whole is facing an increasingly desperate economic situation.
In spring 2023, the country officially entered recession as GDP failed to grow for six months in a row. While the decline was relatively small, prompting some to say the recession was only a temporary and technical one, recent developments have revealed more worrying signs.
Among them, reports show there has been huge investment flight from Germany, prompting many economists to warn of the looming “de-industrialisation” of the EU’s main manufacturing powerhouse.
