Volkswagen is the anti-Tesla and China is to blame
- by Politico Europe
- Sep 16, 2024
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Volkswagen isn’t as fortunate.
This week the automaker ended its three-decade labor agreement with workers, setting the stage for a costly and ugly battle with its works council. The agreement had promised job security until 2029, but those protections will now be in place until June 2025 unless management and the works council can negotiate a new deal.
“The company finds itself compelled to take this action due to current economic challenges,” read an internal note to workers seen by POLITICO.
Europe’s car industry could face fines totalling €15 billion, warned Renault CEO Luca de Meo. | Rudy Carezzevoli/Getty Images
Going up against the workers is part of what cost Diess his job in 2022. The company’s governance structure remains a huge hurdle for executives today in terms of cutting costs and putting the brand on solid financial ground.
The enemy on the doorstep
Volkswagen and Tesla are alike in one way: They face the same challenge of overcapacity.
The Middle Kingdom is facing its own economic headwinds, with the EV boom having led to an oversaturated auto sector that is desperate to sell its cars abroad — including in VW’s European home market. Cheaper production costs, of course, mean Chinese models come with an appealing price tag.
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In Europe, EV sales have dropped off, undercutting Tesla’s dominance. But Volkswagen has an additional burden — it still depends on combustion-engine car sales to prop up its revenue column, as EVs only accounted for 8.3 percent of sales last year. If that doesn’t change fast, VW will be hit with massive fines if it doesn’t meet new EU emissions requirements that take effect next year.
Europe’s car industry could face fines totalling €15 billion, warned Renault CEO Luca de Meo, who also heads European car lobby ACEA.
VW, along with Ford, faces the biggest challenge among European carmakers in meeting the 2025 target, according to an analysis by Dataforce.
VW has urged the European Commission to delay the targets, with current CEO Oliver Blume saying in an investor call that “it doesn’t make sense that the industry has to pay penalties when the framework conditions for the EV ramp-up aren’t in place.”
In an ironic twist, Volkswagen could end up paying Tesla to get its emissions under the line. Carmakers can pool their fleets with battery-only rivals to reach the target, a rule that has proven especially lucrative for Tesla, which earned $1.9 billion in regulatory credits in 2023.
Whether the Commission relents to Volkswagen’s pleading or not, the German automaker will have to push forward with its EV plans.
“There’s been too much procrastination, too much analysis-paralysis among foreign companies thinking ‘is [the combustion engine] going to come back?’” Russo said.
“That was a lot of wishful thinking.”
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