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VW Group Plans To Switch Production to the U.S. and China Due to European Instability

After suffering a global health crisis and an industry-wide chip shortage for the last two years, the Russia-Ukraine war is the straw that broke the camel’s back. As a result, the largest auto manufacturer globally is switching production in the U.S. and China.
Volkswagen I.D 3 6 photos
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During a press call on Tuesday, Herbert Diess, Volkswagen Chief Executive, said the German automaker is making the drastic move due to the ongoing war between Russia and Ukraine, Reuters reported.

He added that the leading manufacturer plans to shift more into China due to the situation in Eastern Europe. When asked what the automaker would do if the Asian giant attacked Taiwan, he responded that he didn’t believe that could be a possibility.

He added that the Asian country wishes to keep its borders open and that China is a stronghold for Volkswagen.

VW, among other leading automakers, has been on the receiving end due to the current situation in Ukraine. Honda and Ford cut production in domestic factories due to geopolitical issues and the industry-wide crisis.

At the beginning of the year, industry experts were certain the chip shortage would end by the end of the year, but after Russia attacked Ukraine, the situation worsened and could go well beyond 2022 into 2025.

Both Ukraine and Russia are exporters of critical raw materials needed in automotive production. Neon and krypton gases supplied by Ukraine are essential in developing microchips. Russia is the world’s largest supplier of crude oil and nickel used in making lithium-ion batteries used in EVs.

According to Diess, VW faces a lack of wire harnesses sourced from Ukraine. The war between the two countries is causing a significant supply chain constraint that affects VW’s local plants.

If the switch doesn’t happen in 3 to 4 weeks, the automaker’s overall outlook might need revisiting.

 
 
 
 
 

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