Photo: Volkswagen | collage
For the past 10 years, Tesla skeptics have been waiting for traditional carmakers to catch up with electric vehicle production. That moment may never come, as Volkswagen appears to have hit a wall and is now forced to cut production at its main EV plant in Germany. Volkswagen blames this on "strong customer reluctance."
Only three years ago, Volkswagen was a strong contender to "surpass Tesla," something that Ford and GM also pledged to do "by mid-decade." It had a great plan, with new EV architectures, EV-dedicated factories, and the full might of Volkswagen Group backing these efforts. But then Herbert Diess, the artisan of this strategy, was fired, and his successor took a different path. Plans for new factories were shelved, and so were the new automotive platforms. At the same time, the aging MEB architecture was given a go to limp along indefinitely.
Nothing good could come out of this non-strategy. As far as electric vehicles are concerned, Volkswagen CEO Oliver Blume basically froze his company in 2018 when the MEB began development. The plans to retool existing factories for EV production also affect the company's finances, increasing production costs to unsustainable levels. Volkswagen needed purpose-built plants like Tesla's gigafactories to stand a fighting chance. Instead, it continued to produce the old MEB platform in the most inefficient way.
That's why Volkswagen is now in a difficult situation. Instead of surpassing Tesla, it's stuck at least 10 years behind, with few, if any, chances to catch up. The market is well aware of that, and that's why Volkswagen has problems finding customers for its electric vehicles. Its sales suffered after the German government cut the subsidies for EV purchases at the beginning of the year. The decision was made because the EV sales gained speed, making incentives unnecessary.
At the end of June, the German carmaker announced it would reduce EV production by 30 percent at its Emden plant in Northern Germany. This factory is building the ID.4 SUV and should soon start production of the ID.7 sedan. Volkswagen also plans to extend the summer vacation, allowing workers an extra week off. This means the plant will stay closed for four weeks instead of the scheduled three-week break. About 300 out of 1,500 temporary workers were also announced they are no longer needed.
Instead of acknowledging that its electric vehicles are no longer competitive in an increasingly demanding market, Volkswagen is blaming its customers for the lackluster sales. Manfred Wulff, head of the works council for the Emden plant, told the German press agency DPA that the problems are caused by "strong customer reluctance." This is interesting, considering other brands have seen increased EV sales in Europe. It looks like Volkswagen customers were reluctant to buy inferior EVs and flocked to the competition in droves.
Volkswagen is expected to delay the ID.7 production start from July to later this year. That would be of little importance from the customers' point of view, considering that this would be an expensive vehicle, even by EV standards. It still rides on the same MEB architecture, and production costs would not allow Volkswagen to sell it competitively. In the meantime, the EV market leader Tesla has announced a record second quarter, with deliveries surpassing the most optimistic expectations.
Nothing good could come out of this non-strategy. As far as electric vehicles are concerned, Volkswagen CEO Oliver Blume basically froze his company in 2018 when the MEB began development. The plans to retool existing factories for EV production also affect the company's finances, increasing production costs to unsustainable levels. Volkswagen needed purpose-built plants like Tesla's gigafactories to stand a fighting chance. Instead, it continued to produce the old MEB platform in the most inefficient way.
That's why Volkswagen is now in a difficult situation. Instead of surpassing Tesla, it's stuck at least 10 years behind, with few, if any, chances to catch up. The market is well aware of that, and that's why Volkswagen has problems finding customers for its electric vehicles. Its sales suffered after the German government cut the subsidies for EV purchases at the beginning of the year. The decision was made because the EV sales gained speed, making incentives unnecessary.
At the end of June, the German carmaker announced it would reduce EV production by 30 percent at its Emden plant in Northern Germany. This factory is building the ID.4 SUV and should soon start production of the ID.7 sedan. Volkswagen also plans to extend the summer vacation, allowing workers an extra week off. This means the plant will stay closed for four weeks instead of the scheduled three-week break. About 300 out of 1,500 temporary workers were also announced they are no longer needed.
Instead of acknowledging that its electric vehicles are no longer competitive in an increasingly demanding market, Volkswagen is blaming its customers for the lackluster sales. Manfred Wulff, head of the works council for the Emden plant, told the German press agency DPA that the problems are caused by "strong customer reluctance." This is interesting, considering other brands have seen increased EV sales in Europe. It looks like Volkswagen customers were reluctant to buy inferior EVs and flocked to the competition in droves.
Volkswagen is expected to delay the ID.7 production start from July to later this year. That would be of little importance from the customers' point of view, considering that this would be an expensive vehicle, even by EV standards. It still rides on the same MEB architecture, and production costs would not allow Volkswagen to sell it competitively. In the meantime, the EV market leader Tesla has announced a record second quarter, with deliveries surpassing the most optimistic expectations.
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