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Volkswagen Slashes EV Production Amid Declining Demand

Volkswagen's Zwickau plant announces a temporary halt in ID.3 and Cupra Born EV production due to shrinking demand and reduced government subsidies

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Come October, Volkswagen (VW) has decided to halt the production of two of its premier electric vehicle (EV) models at two of its key factories in Germany. This decision emerges amidst dwindling demand, a situation further aggravated by the reduction in governmental EV subsidies.

VW’s ID.3 and Cupra’s Born, both central to the brand’s electric ambitions, will momentarily stop rolling out from the company’s primary EV manufacturing facility in Zwickau. This pause will last until October 16. The ID.3’s assembly at another facility in Dresden will also be suspended for the first half of October, as confirmed by a company spokesperson. However, other models like the ID4, ID5, Audi Q4 e-tron, and Audi Q4 Sportsback e-tron are slated to continue their regular production schedules.

Recent times haven’t been favorable for Volkswagen’s Germany-produced EVs. The company is grappling to keep pace with formidable competitors like Tesla from the U.S. and China’s BYD. A cocktail of economic stagnation, augmented living expenses in Europe, and aggressive competition has impacted the appetite for VW’s ID series of electric cars.

An essential factor in this downward trend is the German government’s revised stance on EV subsidies. Earlier this year, the monetary aid for battery electric or fuel cell vehicles was trimmed from €6,000 to a range of €3,000-€4,500, with further reductions set for January 2024.

In what was a significant blow to Volkswagen, especially its Zwickau plant, the subsidies for company-owned EVs were completely eliminated starting September 1. This was a jolt considering a hefty 70% of the electric vehicles manufactured at this facility are intended for company use.

As for the implications on the workforce due to this production hiatus, Volkswagen has remained tight-lipped. However, a recent announcement revealed plans to lay off almost 300 workers at the Zwickau facility.

The economic landscape in Europe, characterized by surging costs, has nudged car manufacturers to reconsider their strategies. Brands like VW, BMW, and even Tesla are gradually shifting their production bases to China. From there, vehicles are manufactured and subsequently shipped back to European markets. For instance, Volkswagen’s next electric SUV, the Cupra Tavascan, which shares its platform with the VW ID.4 and ID.5, is now scheduled for production in a Chinese facility, with its European launch anticipated next year.

Nevertheless, the viability of this China-centric strategy in the long run is under scrutiny. Especially after the European Union (EU) announced its intention to probe Chinese EV subsidies. This move aims to protect the European market from an influx of competitively priced imports.

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