A Volkswagen site in Germany has closed for the first time in 88 years

Starting from Tuesday Volkswagen will stop vehicle production in its Dresden site marking the first closure of production in Germany in its 88 year history. This was recalled by the Financial Times, which underlines how the stop of the plant’s production line occurs at a time when the largest European car manufacturer is under pressure due to weak sales and Chinese demand in Europe, as well as duties USA which weighs on sales in America.

The German giant plans to invest around 160 billion euros over the next five years. The rolling budget, updated annually, has been reduced in recent years. For the period 2023 to 2027, the equivalent figure was 180 billion. CFO Arno Antlitz speculated in October that net cash flow for 2025, previously forecast near zero, could be slightly positive.

However, analysts said the automaker will continue to face further pressure. “There is definitely pressure on cash flow in 2026,” Bernstein analyst Stephen Reitman noted. And he explained that the automaker is looking for ways to reduce spending and increase operating profits. Volkswagen is facing “widespread” challenges, with the expected longer life of fossil fuel engines requiring new investments, Reitman further said.

“We need to consider new generations of petrol technologies,” he added. Moritz Kronenberger, portfolio manager at Union Investment, underlined for his part that some projects should have been eliminated from Volkswagen’s spending plans. For the Wolfsburg giant to reach its investment target, “other ideas and projects must be removed from the plan”, he said.

Dresden has produced fewer than 200,000 vehicles since production began in 2002, which is less than half the annual output of VW’s central plant in Wolfsburg. The new move represents a small step forward for Volkswagen in its plans to reduce production capacity in Germany.

The changes are part of an agreement struck with unions last year, which will also lead to cuts of 35,000 jobs in Germany. VW brand chief Thomas Schafer said this month that the decision to shut down production was not taken “lightly” but that “from an economic perspective it was essential.”

The plant was conceived as a showcase for Volkswagen’s engineering capabilities and was initially tasked with assembling the high-end VW Phaeton. Following the cessation of production of the Phaeton in 2016, the Dresden site has become a symbol of Volkswagen’s electrification efforts, with the recent production of the battery-powered ID.3.

The site will be leased to the Technical University of Dresden to establish a research campus for the development of artificial intelligence, robotics and chips. Volkswagen, together with the university, has committed to investing 50 million euros in the project over the next seven years, while the automotive giant said it will continue to use the facility to deliver cars to customers and as a tourist attraction.