Why is Volkswagen so vital for Germany? – DW – 11/05/2024 | EUROtoday

It’s laborious to be extra German than Volkswagen.

Based in Wolfsburg in northern Germany, the corporate was based in 1937 and created the long-lasting Beatle and the VW Bus and bought individuals shifting world wide.

Today, the corporate is extra than simply Volkswagen (VW). The Volkswagen Group consists of 10 manufacturers like Audi, Bentley, Porsche and Skoda, amongst others.

By gross sales, it was the biggest car manufacture on the planet from 2016 till 2019. It remains to be Europe’s largest automaker.

It has 114 manufacturing amenities and 684,000 workers world wide. Last yr, it offered 9.2 million autos and introduced in €322 billion ($351 billion) in income, essentially the most ever.

How vital is the auto trade for Germany?

Volkswagen was lengthy referred to as an engineering and manufacturing lighthouse. Its prowess helped propel the nation’s “Wirtschaftswunder,” or financial miracle, that revitalized West Germany after World War II.

Vehicle manufacturing remains to be vital for the nation.

In 2023, practically 780,000 individuals had been employed in German factories that make motor autos and motorized vehicle elements, in keeping with the German Association of the Automotive Industry. Of this complete, over 465,000 staff had been employed by elements and tools suppliers.

Last yr, the German car trade generated over €564 billion in income, in keeping with statistician Statista. In 2022, it introduced in €506 billion.

How vital is VW for Germany?

For its half, Volkswagen Group has round 300,000 workers in Germany. The 87-year-old VW model has about 120,000 of those.

Many native economies depend upon VW — it’s the nation’s greatest industrial employer. Slowdowns on the firm may have knock-on results on suppliers, sellers and decisions for customers.

Suppliers are already planning for a special sort of future. In February, Hanover-based Continental, the world’s third-largest automotive provider, introduced 7,150 job cuts worldwide by 2025. In July, ZF Friedrichshafen, one other auto provider, stated it could minimize 14,000 German jobs by 2028.

What is Volkswagen proposing?

At Volkswagen the state of affairs is dire. Just because the IG Metall metalworkers union was demanding a 7% pay enhance in October, the corporate introduced a 64% drop in third-quarter web revenue in contrast with the identical quarter a yr in the past.

It rapidly grew to become clear that the administration wished to shut at the least three of its 10 crops in Germany, downsize different amenities, minimize 1000’s of jobs and cut back wages by at the least 10%.

The firm has fired German staff earlier than, however it has by no means closed a plant in its homeland. The information was a wake-up name to the EU’s greatest financial system because it struggles on many fronts with sputtering progress.

The state of Lower Saxony is residence to round a 3rd of the group’s German workers and its premier is towards any manufacturing unit closures. In most locations and for many firms this would not matter a lot, however Lower Saxony has a 20% voting share within the firm and a seat on the supervisory board.

Why is Volkswagen struggling?

The first large hit to Volkswagen’s repute was the Dieselgate software program scandal, which got here to mild in 2015. It was an enormous embarrassment that led to settlement fines and funds exceeding €31 billion. The then CEO remains to be on trial after being accused of perjury, market manipulation and fraud.

More lately, power prices, inflation and the excessive price of German staff are responsible for a dismal outlook, in keeping with the corporate administration, and that’s hurting its probabilities to speculate sooner or later.

VW isn’t alone with its issues. German rivals Mercedes and BMW have additionally lowered their outlook for the yr. They all face greater prices and altering buyer tastes.

At the identical time, demand for Volkswagens is falling in Europe and particularly China, its greatest and most profitable market.

For a long time, VW was the market chief in China. The firm nonetheless sells essentially the most petrol-powered autos there, however within the first 9 months of this yr, its Chinese gross sales had been down over 10% as clients purchased home-grown autos. In Germany, gross sales had been down by a average 1.6% as compared.

What is VW doing about China?

Another downside is VW’s lack of imaginative and prescient to see how the marketplace for electrical autos (EVs) would develop.

Volkswagen didn’t ignore mobility developments and spent quite a bit on making an attempt to show into an EV participant. So far, the investments haven’t panned out. Attempts to create its personal inhouse software program are suffering from issues and delays.

Where VW is struggling, China is the driving drive and is on the forefront of the shift to electrical autos with rivals BYD, NIO and XPeng Motors. Half of all new automobile gross sales within the nation are EVs and the nation is determined to construct and export extra of them, which highlights VW’s final downside.

The European Union imposes a ten% responsibility for EVs made in China. But in October, they launched new tariffs of as much as 45% for Chinese EVs due to big subsidies supplied by the federal government in Beijing.

The transfer will seemingly maintain Chinese autos out of the EU for now, however German manufactures like VW worry Chinese retaliation might damage their very own alternatives and massive investments in Asia.

To stay related, VW will not must reinvent the wheel, however it might want to reshape its enterprise and car providing at residence and overseas.

Edited by: Uwe Hessler