(DCNF)—Volkswagen (VW) said Wednesday that it needs to cut costs amid slackening consumer demand for electric vehicles (EVs) and weaker car sales in China.
VW’s profits fell 64% in the third quarter of 2024, driving the company’s share price to its lowest level since October 2010. Now, the world’s largest automaker by sales is looking to lower its expenses, with VW’s top labor leader announcing earlier this week that the company was aiming to shut at least three of its German factories, slash wages 10% and lay off thousands of employees.
“We’ve not forgotten how to build great cars, but the costs, specifically in our German operations and factories, are far from being competitive,” Chief Financial Officer Arno Antlitz told The Wall Street Journal Wednesday. “Things cannot continue as they are now.”
VW crisis is getting worse…
Volkswagen’s Q3 profit dropped a steep 64%, largely due to big losses in China. Their net profit fell from €4.34 billion last year to €1.57 billion, and revenue dipped to €78.5 billion. The group’s operating profit margin also shrank, while the… pic.twitter.com/CtumLnjXHW
— Bullion Bite (@bullionbite) October 30, 2024
VW’s profitability challenges come as consumer demand for EVs has weakened in recent years, with EV sales growing 50% in the first half of 2023 and 31% in the first half of 2024, far less than the 71% increase in the first half of 2022. As a result of this decline, the company walked back plans to sell shares in its EV business in January.
The automaker’s disappointing earnings also result from increased Chinese competition in the EV market, the WSJ reported. Deliveries in the Asian superpower fell 15% in the third quarter of 2024, largely due to lower-cost Chinese options such as BYD’s 2025 Seal EV.
VW’s cost-cutting plan would mark the first time the company has shuttered one of its German factories in its 87-year history, and has brought significant backlash from worker groups. Daniela Cavallo, head of VW’s works council, said tensions could “soon escalate” into a strike during a speech in Wolfsburg, Germany — the site of a VW factory that the company’s website describes as the “heart” of the brand.
“I’m confident that we’ll reach an agreement … but of course, I cannot rule out strikes,” Antlitz told the WSJ.
VW did not immediately respond to a request for comment.