Volkswagen, once the unchallenged crown jewel of German engineering and a beacon of global automotive excellence, now finds itself in the throes of a crisis threatening not only its legacy but also the foundation of Germany’s industrial might.
In our previous blog, What’s the Future of Volkswagen? , we highlighted the impending closure of multiple VW plants in Germany. Today, we take a closer look at the journey of this legendary automaker, unraveling the factors behind its meteoric rise and its current stall.
1. The EV Revolution: A Shock to the System
Remember the 2015 diesel scandal? It cost VW billions in fines and forced it to shift gears fast, pivoting toward electric vehicles (EVs). But let’s be real—making EVs isn’t just about swapping out engines. Batteries, software, and innovation are the name of the game.
And that’s where Tesla is speeding ahead. While Tesla aces vertical integration (making batteries, software, and cars in-house), VW has stumbled. Its attempts to build proprietary battery plants and software units have been costly and clunky. Worse, the company lacks an affordable “electric people’s car” to win over everyday buyers in Germany and beyond.
The result? Sluggish EV sales, with new registrations down for most of 2023. VW, which once made cars everyone wanted, is struggling to make EVs anyone can afford—or desires.
2. China’s Rise
China, once VW’s largest market, is now dominated by local EV makers offering competitive, affordable options. Chinese EV makers have eaten into VW’s market share, leaving the German automaker scrambling to catch up. While the EU has imposed tariffs on Chinese EV imports to protect European brands, it might be too little, too late for VW.
3. Factory Closures: The Fight at Home
VW is considering closing several German factories—a first in its 87-year history. This has sparked outrage among workers, unions, and local governments, especially in Wolfsburg, home to VW’s largest plant, isn’t just a factory—it’s the lifeblood of the city. If it shuts down, Wolfsburg could face an economic collapse.
VW workers, known for their well-paying, stable jobs, are understandably worried. “What’s next for us?” they ask, as management weighs downsizing against protecting its workforce of 140,000 German employees.
4. Global Competition and Tariffs
Rising competition in the U.S. and Europe, coupled with the threat of tariffs, has added another layer of complexity to VW’s struggle for survival.
5. Can Volkswagen Turn Things Around?
CEO Oliver Blume is spearheading efforts to modernize VW, promising competitive EVs by 2025 and partnerships with Chinese EV companies to regain lost ground. However, the road ahead is steep, with mounting global competition and internal resistance from labor groups and political stakeholders.The bigger picture is daunting. VW’s struggles mirror the challenges of Germany’s traditional manufacturing-heavy economy, which is struggling to keep pace with the demands of a fast-changing, tech-driven world.
6. Can VW Stay on Track?
Volkswagen’s situation isn’t just about one company—it’s about what Germany stands for. As the backbone of the country’s industrial identity, VW’s success or failure will ripple far beyond its factories.
Can this auto icon reinvent itself for the EV era? Or will it stall on the road to the future? Whatever happens, one thing’s for sure: The world is watching.
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