Is Volkswagen’s move to electric cars too soon? An unexpected shift in electric vehicle strategy.

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Volkswagen (VW), Germany’s leading automaker, recently took the auto industry by surprise by unveiling an adjustment to its electric vehicle (EV) strategy.

Failure amid a promising start.

At the start of the pandemic, VW faced a surge in demand for its electric vehicles. The boom in demand collided with global chip shortages and various supply chain disruptions that made on-time deliveries very problematic. Nevertheless, despite the challenges, VW has managed to launch several new electric models in Germany, China and the US. In addition, the company has revealed plans to open a new electric vehicle manufacturing plant near its legendary Wolfsburg headquarters.

Change of direction.

Contrary to initial ambitions, VW has decided to focus on utilizing its existing plants in Wolfsburg and Zwickau. Bloomberg reported that the automaker has cut back on EV production in Germany and postponed its $2 billion Wolfsburg plant project. In an official statement, the automaker said, “It has been decided that there is no need to build an additional plant in Wolfsburg-Warmenau.”

Key events.

  • Project Trinity: The long-awaited new Project Trinity will now be produced at the Zwickau plant where the ID range was previously introduced. This platform, scheduled for production in 2028, will feature faster charging and Level 4 autonomous driving capability.
  • Electric version of the VW Golf: An electric counterpart to the legendary VW Golf is being prepared. With more than 35 million units sold since 1974, this model represents a significant value for VW.
  • Economic Challenges: In 2022, demand for electric vehicles in Europe declined, leading to competitive pricing and production cuts by auto giants. In December 2022, VW also cut electric vehicle production in Germany by 10% due to lower demand and chip shortages.
  • Concerns and challenges.

    The slowdown and increased competition in the electric car market has perplexed VW’s top management. They voiced their concerns even as new EV models were slated for 2024 in the U.S., a market where VW aims to compete with Tesla for supremacy.

    Volkswagen brand CEO Thomas Schaefer said, “Our industry is facing challenges as it undergoes a transformation.”

    These challenges have been exacerbated by the German government’s decision to end subsidies for electric vehicle sales to business customers, which led to a surge in electric vehicle sales in August but then a decline. The move particularly affected automakers such as VW and BMW, which reported production cuts.

    Management turbulence.

    Adding to the complexity is the unclear position of Herbert Diss, whose absence is generating all sorts of speculation. Oliver Blume, although known for his competence, will have the difficult task of navigating the complex dynamics surrounding the influential families and government of Lower Saxony.

    Final thoughts.

    While the electric car revolution is moving forward, the road is not without its challenges. Volkswagen, which was once considered quite capable of weathering these storms, is now showing signs of anxiety. The auto industry and consumers are waiting for further developments from this key player.

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