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Volkswagen is currently facing one of the greatest crises in its history. The German automobile giant plans to close several factories and cut up to 10,000 jobs in Germany. The background of these drastic measures is complex and multifaceted, highlighting the deep structural issues VW is dealing with. Prof. Anja Schulze, Director of the Swiss Center for Automotive Research and Professor at the University of Zurich, sheds light on the causes and consequences of this crisis.
Weak Markets and Overcapacity
Volkswagen is struggling with weak sales in Europe. The market shows no growth, while the company’s production capacities, both for combustion engines and electric vehicles, are significantly higher than current demand. This overcapacity leads to inefficient plant utilization and drives up costs. The European market currently offers little room for increased sales, exacerbating VW’s structural issues.
Loss of the Chinese Market
Particularly problematic for VW is the loss of its market leadership in China. For decades, the Chinese market was a major source of high profits, which were reinvested in European markets. However, in recent years, VW has lost substantial ground in China, with its market share dropping below 15 percent. Reasons for this include the rapid development of electromobility and the growing popularity of domestic brands in China. While Chinese manufacturers are offering electric vehicles with advanced digital features and entertainment systems, VW lags behind in this area.
Management Failures and Delayed Transition to Electromobility
According to Prof. Schulze, management decisions and a delayed response to the boom in electromobility have contributed to the current crisis. Tesla and other pioneers in the field were not taken seriously for a long time, and VW held onto combustion engine technology for too long. The decision to purchase batteries from China instead of producing them in-house has also increased the company’s dependency on external suppliers. Battery production accounts for around 30 to 40 percent of vehicle costs and is a critical factor in the competition for electric vehicles.
Challenges in the European Market
In Europe, VW faces additional political pressures. The EU and national governments are increasingly pushing for CO₂ emission reductions, forcing VW into a costly transition. According to Prof. Schulze, it was likely necessary for external players like the government to intervene in the market to push electromobility forward. Nonetheless, VW is struggling to handle the high transition costs while simultaneously producing competitive electric vehicles.
Conclusion: A Rocky Road Ahead
Volkswagen’s crisis is the result of structural problems, strategic misjudgments, and a changing market landscape. To regain competitiveness, VW must rethink its strategy and focus resolutely on electromobility and digitalization. Prof. Schulze sees the challenge as substantial but not insurmountable. VW stands at a crossroads, and the coming years will determine whether the company can maintain its position as one of the world’s leading automobile manufacturers.
The future of VW depends on how quickly and decisively the company responds to the current challenges. One thing is clear: VW will need to make fundamental changes to reposition itself in the global automotive market.
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