There is an old proverb that says that «Chaos is resolved with more chaos» And that seems to be what they are doing within the Volkswagen Group. The German consortium is experiencing very turbulent times because of the decisions that those in charge made just over five years ago. The commitment to mass electrification has been a fiasco, no matter how you look at it, and now they are where they are. Desperate to avoid losing much more money.
Volkswagen is the brand that is having the worst time Because it is the leading company in the group, it is the one that was going to capitalize on the most models. In fact, it was the one that launched the already maligned MEB platform that they have even sold to Mahindra and the Americans at Ford. Well, They want to resolve the chaos by closing factories The German ones could be added to several of the centres they have in operation in China. Will this be enough or could they go a little further…?
Volkswagen has a total of 39 factories in China with its local partners SAIC Motor and FAW…
You didn't know but The Volkswagen Group has so far had a dominant position in China. It used to be the foreign company that manufactured the most cars, even ahead of General Motors, but that is no longer the case. With the rise of the local industry itself, they have seen how customers have left their dealerships to buy local products. The fact is that now they are not able to sell cars there at the rate they used to and their centres are increasingly idle…
So important is, or was, China for Volkswagen that Over the many years they have been in the country, they have opened 39 factories.. They have been able to do this with the support (imposed by the Asian country) of local partners FAW and SAIC, who are now “snatching it up” by the feet. Together they have set up factories that can assemble more than 3 million units in a year. However, the drop in sales in that country is complicating everything for them…
If we look at the numbers, we can see that Volkswagen is on the decline in China. So far this year, the brand has registered a total of 1.246.564 cars. which represents a fall of 8 percent compared to the same period last year. Audi fell by 5,4 percent to 385.959 units, Skoda by 37,8 percent to 10.138 units and Jetta (local Chinese firm) by 26,4 percent to 76.617 units.
If we go to the global computation Volkswagen ranks second in China's car brand rankings. Number one is BYD, which sold 1.957.430 cars (+26,4 percent) from January to August, and number two is Toyota, which sold 945.963 (-13 percent less) in the same period. With these figures in hand, even Toyota is having problems and has even announced the reduction of a third of its electric production…
And with the huge drop in sales, it could lay off some of its 90 employees…
But if the Volkswagen data still doesn't tell you anything, we'll tell you now that It has about 90 thousand employees in the country. This volume is not very high compared to the more than 300 thousand it has in Germany, but it is an important indicator that could tell us what its future could be. To save costs it will cut back because it is the easiest move to start with, although it is also the most unpopular because it could damage its image…
However, Volkswagen is not going to shoot itself in the foot when it comes to risking its image. Skoda is worse off than it is and to improve its situation Czech factories may be the ones to suffer the consequences. Today, the Mlada Boleslav company produces its models for China in SAIC-VW factories. Therefore, with annual sales of just over 300 units, they could already be closing down 58 percent of their production capacity.
The Ningbo plant (which assembles the Skoda Octavia, Karoq, Audi Q6 and several Volkswagens) has been inactive for several months and will be one of those that will close. The Nanjing factory (Skoda Kamiq, Superb and Volkswagen Passat) has already been awarded a contract to close in 2025. Meanwhile, the assembly of these models will be moved to other plants that will see their capacity increased with the same number of employees while the rest are laid off.
We'll see what happens but it seems that Volkswagen has a really serious problem on its hands... And watch out! The rest of the brands and groups in the sector in Europe are not much better off… We will be attentive…
Source - Bloomberg
Images | Volkswagen
