Volkswagen Group's electric vehicle demand issues in Europe appear to be piling up and require additional adjustments at the production sites in Germany.
After a few reports about some production reduction at the Emden plant, upcoming employment cuts in Zwickau, as well as potential end of production in Dresden, new reports from Germany indicate that further production cuts are needed to balance supply with demand.
According to Reuters, the Volkswagen Group will suspend production of the Volkswagen ID.3 and Cupra Born at its Zwickau and Dresden plants in Germany for the first two weeks of October (during the autumn holidays in Saxony from 2 to 13 October).
The two MEB-based models are produced in Zwickau (additionally, the ID.3 is produced on a relatively small scale in the Transparent Factory in Dresden), but demand is too weak to maintain the current manufacturing output.
It's worth noting that four other MEB-based models produced in Zwickau - the Volkswagen ID.4, and ID.5, as well as Audi Q4 e-tron/ Audi Q4 Sportback e-tron - will continue to be produced in three-shift operation. In other words, the demand issue seems to be more related to compact hatchback EVs rather than crossover/SUVs.
The article confirms that, at least in the case of the Dresden plant, production will resume on 16 October. We guess that it will be the same in Zwickau.
Nonetheless, temporary production cuts are not a solution. The second Reuters' article reveals the Volkswagen Group might entirely terminate three-shift production at the Zwickau plant because it's not able to sell as many cars as the plant is set to produce (some 330,000 annually - six models total). In 2022, production amounted to 218,000.
The agreement has been in place since 1991. The electrification plan, introduced a few years ago when the factory was transformed from 100 percent ICE to 100 percent EV production, assumed that production and employment would continue at full capacity.
Today, we hear that the company is negotiating a new production agreement with workers in Zwickau and potentially will terminate the third shift as soon as 2024. The company's spokesperson said: "The aim is to reach a new agreement, jointly supported by the company and the employees, which takes into account the current market situation and ensures the economic viability of the site."
Well, we will see how this develops, but it's already clear that at least in some segments, things are not progressing as smoothly as initially anticipated, despite the fact that the all-electric market, as a whole, is growing both globally and in Europe.