EV industry to Volkswagen: We warned you!

Who could have foreseen last week’s news that the Volkswagen Group planned to slash vehicle production, or the more recent announcement that 50,000 more workers might be let go? Well, anyone who has been following the EV transition over the past decade foresaw it, or should have.

As the New York Times understated it, the retrenchment “seemed to be a tacit acknowledgment that the company had gotten too big and complicated and needed to slim down to survive the global shift from fossil fuel cars to electric vehicles.”

Here at Charged, we take no schadenfreude in saying “We told you so.” Nor would we deny that we have always advocated a shift to e-mobility and an end to the Oil Age. But it wasn’t just EV boosters, engineers and scientists who warned VW and its peers about the coming electric storm—the company’s own CEO tried to turn the ship around several years ago, and was fired for his trouble.

Slimming down

The news from Wolfsburg is grim. CEO Oliver Blume announced a 12-step restructuring plan that he called “the most comprehensive realignment in the company’s history.”

The corporate slimming process has already been underway for a few years. Over the past two years, VW reduced annual production by 2 million units. The company now plans to cut production of cars from a pre-pandemic level of 12 million to 9 million.

In 2024, VW announced a plan to reduce the workforce by 50,000, and some 37,000 jobs have already been cut through “socially responsible” measures such as voluntary early retirement packages. However, Mr. Blume now says that a further 50,000 jobs are at risk.

Blume said the company needs to “get rid of excess capacity,” but the company’s powerful works council strongly resists any plant closures.

Like all the legacy auto giants, VW could stand to lose some weight, and to be fair, failure to electrify is not the cause of its corporate obesity. The Volkswagen Group has 111 production facilities on every continent except Australia and Antarctica, and produces cars and trucks under a myriad of brands. Some models are similar or identical except for the badging.

VW management seems to be blaming “overproduction” for the company’s woes. The Times tactfully suggests that the failure to offer EVs that can compete with Chinese offerings might just be part of the problem: “Volkswagen’s troubles are an ominous sign for established Western and Japanese carmakers. To varying degrees, all of them are grappling with changing technology and competition from Chinese manufacturers.”

What might have been

Back in 2016, as VW recovered from the public humiliation of the Dirty Diesel Debacle, the company seemed to be turning down the right path, and if it had continued down the electric highway, the global auto industry would look very different today. Saying that his company was “using the current crisis to fundamentally realign the Group,” Volkswagen Group CEO Matthias Müller announced plans to introduce 20 new plug-in models by 2020 (didn’t happen).

In 2019, as other automakers were crying the blues about EV profits, new CEO Herbert Diess said he didn’t expect a deterioration in margins, and pointed to indicators of strong EV sales.

In 2020, Diess, now seen as a staunch EV advocate, won a major boardroom battle, as the board unanimously voted to continue to back Diess and his electrification plans. Representatives of VW’s employees were also included in the decision. “There is total agreement between the Supervisory Board, the Board of Management and the employee representatives,” said the chairman of the Volkswagen Group Works Council (roughly, the German equivalent of a labor union).

In 2021, Diess took the highly controversial step of inviting Tesla’s CEO (at that time still considered to be compos mentis) to address 200 executives, in order to emphasize the point that VW needed to move faster to make the transition to e-mobility.

A year later, Diess was gone, and so was VW’s status as an EV pioneer. A remark Diess made in 2021 was widely interpreted as implying that electrification could cost as many as 30,000 jobs. The way we and others parsed his statement, he was saying that moving too slowly on electrification was the threat to jobs. But apparently, by merely mentioning “job losses,” Diess touched the third rail of German politics. The works council withdrew its support, and in 2022 the company’s supervisory board voted unanimously to ditch Diess.

His replacement, Oliver Blume, immediately slammed on the brakes on Volkswagen’s aggressive electrification policy. “Our strategy is to keep combustion engines on the market for the time being because they are very popular in many regions of the world,” Blume said at the time, adding some risible remarks about synthetic fuels, which many scientists consider to be nothing more than a tank full of greenwash.

Since Blume became CEO, as reported by the Times, VW’s sales have plunged, especially in China, where it was once the top-selling automaker, and the company’s shares have lost almost 60% of their value. The number of jobs considered to be at risk has apparently grown from Diess’s estimated 30,000 to 100,000.

It’s not too late

Despite China’s huge lead, we still believe European automakers could catch up in the EV race, but if they keep insisting that all they need to do is make a few minor adjustments, they are doomed.

We haven’t yet heard any admission that VW and its peers are responsible for their current predicament, or any plans for the swift and decisive shift to EVs that is needed. On the contrary, automakers are still lobbying their governments to water down regulations and slow the transition—precisely the opposite of what they should be telling their political representatives.

The gradual and painless transition to EVs that legacy automakers still seem to envision has always been fantasy. At this late hour, it might be better described as a dangerous, self-defeating delusion.

Sources: New York Times, manager magazin