Weak EV demand forces VW to cut jobs at Zwickau plant

Volkswagen is laying off workforce at its biggest plant for EV manufacturing in Zwickau. As incentives are declining and the economy remains weak, demand for the ID. models is underperforming. Volkswagen made the decision official at an extraordinary works council yesterday.

The German car giant will not extend the interim contracts of 269 laborers who must leave the factory in October. Talks with the unions are scheduled to investigate whether a change in the shift system is a further possibility to align supply and demand. Slow EV sales, a utilization undercapacity of 30%, and fierce competition from China are causing ripples through the factor hall of Zwickau.

MEB family

In the plant, some 10 000 workers, of which 2 000 have interim contracts,  assemble battery-powered models from the MEB family, ranging from the ID.3 to the Audi Q4 e-tron. But corporate demand lags, and private customers in Germany can no longer benefit from incentives, making it harder for the Volkswagen Group to shift its homemade models, suffering from higher labor costs.

The representative from the IG Metall Union, Thomas Knabel, called the decision a “personal tragedy for the 269 persons affected, both for themselves and their families.” The lay-offs could expand to the other interim contracts shortly. A spokesperson for Volkswagen said that this option remains open until the end of 2026 “if market conditions don’t improve.”

Fierce competition

The Zwickau plant is modeled as the most efficient EV factory in the group, ready for an annual capacity of 300 000 units. Whether these ambitions can be upheld remains a question now that the group faces unmet targets. Group CEO Oliver Blume stated before that his company needs to find an additional 10 billion euros to meet the demands from the EV switch after that exact amount was cashed by splitting off Porsche shares in an IPO.

The weak demand is attributed to several reasons, like high inflation, recession, lack of consumer confidence, and dwindling incentives. But Volkswagen also faces high German labor costs, clogging competition with the lower-priced Chinese rivals and Tesla, which manages to manufacture EVs at a more competitive price in the same country.

Tavascan from China

It takes the American automaker ten hours to assemble a Model 3, but for an ID.3, the production time is threefold. On top of that, Tesla has been aggressively downpricing its models, gaining market share all over Europe.

The German group is taking action by delocalising some of its future EVs. The Cupra Tavascan, for instance, will be produced in China and exported from there to slash labor costs.

And Audi Brussels?

It is unclear if side effects for the Audi factory in Vorst, Belgium, should be feared. It is in complete preparation to manufacture excess demand for the Audi Q4 e-tron to compensate for the lack of capacity at Zwickau.

According to experts, the Volkswagen branded models are more affected than Audi’s, which remain popular in corporate circles. It led to waiting times of two years when the supply chain shortage was at its peak.