Volkswagen Temporarily Cuts Production of European EVs
Volkswagen has announced that it will temporarily limit production of the SEAT Cupra Born and its own ID.3 EV in October. The company has attributed this decision to market forces, stating that its plants in Zwickau and Dresden, Germany, will be scaled back for a few weeks.
Reasons for the production cut
According to Reuters, the decline in regional demand for both models is due to the increasing popularity of Chinese EVs in Europe. In addition, the inflationary pressures and reduction of electric vehicle incentives in the European Union have also affected pricing. It is worth noting that the ID.3 is technically a Chinese-made EV.
While most European allocations come from Germany, the examples from the Chinese market are a result of the joint partnership between Volkswagen Group and SAIC Motor and are assembled domestically.
Production scale-back details
Vehicle production at Volkswagen’s Zwickau plant will be scaled back from October 2nd to 13th, while the Dresden facility will experience a production cut from October 2nd to 16th. The number of employees affected by this decision has not been disclosed by the company. However, earlier this month, VW announced that it would not extend the fixed-term contracts of 269 employees at its all-electric Zwickau plant, indicating that there may be more going on behind the scenes.
Mixed demand for different models
While demand for the ID.3 and SEAT Cupra Born has declined, there seems to be an increase in demand for the ID.4 manufactured in Chattanooga, Tennessee. However, it is important to consider that this uptick in demand may be a result of a slow launch undermined by production issues.
Global performance of Volkswagen’s EVs
Volkswagen’s EVs have not been performing well on the global stage. Both the ID.3 and ID.4 have undergone significant price cuts in China. For instance, the ID.4 launched with a Chinese MSRP of 193,900 yuan (approximately $27,000 USD) in 2021. After multiple markdowns, it now costs just 145,900 yuan (about $20,000 USD), while the U.S. version retails around $39,000.
Similarly, the ID.3 has experienced price cuts and now starts at around $16,500 in China. However, in the United Kingdom, the same model is priced closer to $44,000. This pricing discrepancy, coupled with cheap competition in the Chinese market, poses a challenge for Volkswagen’s EVs.
The future outlook
Volkswagen finds itself in a challenging situation. While price cuts in China have led to a 300-percent increase in regional sales for the ID.3 between June and July 2023, the company has been experiencing shrinking volumes in Europe and China over the past few years. The company has managed to improve vehicle margins to avoid a complete disaster, but as more customers are priced out of the new vehicle market, this strategy may not be sustainable in the long term.
It remains to be seen how Volkswagen will navigate these challenges and whether it can regain its foothold in the EV market. Price cuts have shown some positive impact on sales, but the company needs to address the underlying issues affecting demand and pricing to ensure long-term success.
In conclusion, Volkswagen’s decision to temporarily cut production of the SEAT Cupra Born and ID.3 EV reflects declining demand and pricing challenges in the European market. The company’s EVs have faced tough competition from Chinese models and have had to resort to price cuts to remain competitive. The future of Volkswagen’s EVs will depend on its ability to address these challenges and adapt to changing market dynamics.
