Sales slump at VW and Porsche

Herbert Diess can be accused of many things, but not of a lack of modesty. The manager wanted to transform Germany’s largest car company, Volkswagen, into the world market leader in electromobility by “2025 at the latest”. He once promised this with great confidence. But the plan did not work out: Diess left the company long ago, and his successor in office, Oliver Blume, can only dream of market leadership at best.

VW sold almost 800,000 electric cars across all brands last year, more than ever before. However, battery-powered cars only accounted for a good eight percent of the car company’s total sales. This in turn means that VW has recently made money primarily from its combustion engine models. There is little hope that this will change any time soon, as the Wolfsburg-based company has recently had to contend with a severe drop in sales.

1000 jobs lost

Volkswagen now even wants to cut shifts and jobs at its Zwickau plant. Up to 1,000 temporary employment contracts that expire at the end of the year are not to be extended. “We are lacking new orders,” said company spokesman Christian Sommer to the “Freie Presse”. This would not be the first job cuts at the East German plant, which was fully converted to the production of electric cars in 2022. Volkswagen had already cut 800 temporary contracts there at the end of last year.

After the factory holidays, production lines in Zwickau will also be switched to two-shift operation without night shifts because demand is so low. VW subsidiary Porsche is currently considering similar things: Because demand for the electric flagship model Taycan is weakening, the premium manufacturer wants to cancel production shifts at its main plant in Zuffenhausen.

Negotiations are currently underway between the board of directors and the works council, reports the magazine “Auto Motor und Sport”. At least: Porsche is not planning to cut jobs like its parent company Volkswagen – at least for the time being.

Heels collapse

In fact, German buyers are now giving electric vehicles a wide berth. This is shown by new statistics from the Federal Motor Transport Authority: In June, around 43,500 new battery-powered cars were registered, 18 percent fewer than in the same month last year. In the first half of the year, sales fell by 16.4 percent compared to the same period last year.

There are several reasons for the electric crisis affecting German car companies. “On the one hand, car manufacturers have obviously overestimated the demand for electric vehicles,” says Joachim Ragnitz, economist at the Ifo Institute in Dresden. Excessive production capacities must therefore now be reduced. “On the other hand, German companies are also under pressure because Chinese competitors such as BYD are offering their models at significantly lower prices.”

The job cuts and shift reductions in German plants have not yet had a dramatic impact on the industrial location. “However, if demand for electric vehicles does not increase again, there is a risk that suppliers will also be affected,” Ragnitz told the NZZ.

Ultimately, the sales crisis of German car companies is also a politically triggered development, says economist and automobile expert Ferdinand Dudenhöffer. “Last year, Economics Minister Robert Habeck canceled the purchase premium for electric cars overnight, thereby destroying the ramp-up of electromobility overnight,” Dudenhöffer told the NZZ.

Brussels also bears some of the blame for the German car crisis. “The EU Commission’s decision to impose punitive tariffs on cheap Chinese electric cars is based on a misguided perception of the market.” This not only discourages buyers from purchasing inexpensive vehicles. “German industry is also being damaged, because the majority of vehicles imported from China are produced by European manufacturers.”

Corporations are changing course

In view of this development, a strategic turnaround can be observed in the boardrooms of German automobile manufacturers. The premium manufacturer Mercedes-Benz, which is also suffering from sales problems, has scrapped its goal of selling exclusively electric vehicles from 2030 onwards.

Instead, CEO Ola Källenius announced that he would invest more money in the development and production of combustion engines. Mercedes-Benz will continue to build combustion engines “well into the thirties,” he said in an interview with the “Frankfurter Allgemeine Zeitung.”

Competitor BMW has recently been able to significantly increase sales of its electric vehicles. However, the Munich-based manufacturer does not want to rely entirely on electric cars. Unlike Volkswagen or Mercedes-Benz, however, the Bavarians have never sworn off combustion engine technology. BMW boss Oliver Zipse has repeatedly asserted that they will offer petrol and diesel engines as long as there is a market for them.

Volkswagen is now hoping that the state will step in and help overcome the electric crisis. Works council chairwoman Daniela Cavallo recently called on the federal government to resume its subsidy program: “Anyone who promises bonuses should stand by them in the long term,” she told “Spiegel.”

Otherwise, the governing coalition’s goal of putting around 15 million electric cars on Germany’s roads by 2030 will be unattainable.