The German auto market is undergoing a significant shift. While plugin electric vehicles (EVs) hold a 22.8% market share, battery electric vehicle (BEV) sales are down year-over-year, despite a growth in plug-in hybrid (PHEV) sales. This is happening amidst a weak German economy and a lack of consumer demand for expensive BEVs.

Volkswagen Group is facing major challenges. Despite leading in BEV sales with brands like Skoda and VW78, the company is grappling with a decline in overall sales and market share, both in Europe and China. They’re planning factory closures and job cuts, which has led to significant labor disputes and strikes. The company’s stock has also taken a hit, falling nearly 25% this yea.

New EV models are entering the market, some from Chinese manufacturers, creating more competition. The upcoming 2025 emissions regulations may push manufacturers to offer more affordable BEVs.

In short: The German auto market is struggling with weak BEV sales and a poor economy. Volkswagen is in crisis with declining sales, restructuring, and labor unrest, while facing increased competition and the possibility of new, more affordable BEVs entering the market in 2025.

This article examines the current challenges facing the Volkswagen Group, focusing on recent sales data, financial pressures, and labor disputes. The documents reveal a complex situation involving a struggling German economy, declining sales, increased competition (especially in EVs), and tense negotiations with labor unions over cost-cutting measures. These issues have led to significant financial uncertainty for the company and the potential for major restructuring.

I. Market & Sales Trends (from “EV sales up.pdf”)

• Overall EV Market in Germany:In November, plug-in EVs held a 22.8% market share (14.4% BEV, 8.4% PHEV), down from 25.7% YoY (18.3% BEV, 7.4% PHEV).
• BEV sales declined year-over-year (YoY), but from a high 2023 baseline impacted by a pull-forward effect due to anticipated incentive changes. This incentive was then summarily canceled in December.
• The article also points out that BEV sales would usually be increasing as a year ends due to manufacturers trying to meet fleet average emission goals, but this year, no such push is being seen.
• PHEV sales saw a “decent increase” YoY due to new models with longer electric ranges.
• Combustion-only vehicle share declined, though less than BEV share. Diesel share declined to 14.9% from 16.1% YoY.
• Dominance of Volkswagen Group:Volkswagen Group dominated BEV sales in November, securing the top 4 spots with the Skoda Enyaq, VW ID.7, VW ID.4/ID.5, and Cupra Born.
• This pattern of the same 4 models in the top 4 only happened once previously, in April.
• In the 3-month ranking, Volkswagen Group brands also hold the top 3 spots (Skoda Enyaq, VW ID.7, and VW ID.4/ID.5).
• Volkswagen Group holds 42.8% of Germany’s overall BEV market in the last 3 months, up from 33.9% in June-August.
• Volkswagen Group’s success is seen as a “strong home lead”.
• Emerging Competitors:New BEV models from Kia, Ford, Citroen, Volvo, Leapmotor and BYD are growing.
• The Leapmotor T03, a small, affordable EV from China, launched with a starting price of €18,900.
• The new Skoda Elroq and BYD Sealion SUV also launched in November.
• Overall Market ConditionsThe German economy is in poor condition, with GDP being negative 0.3%. Headline inflation is also up (2.2%), and manufacturing PMI remains weak (43.0).
• Consumer demand is weak and BEVs are considered overpriced.
• Manufacturers are delaying BEV deliveries in order to improve their sales when new emission regulations come into effect in 2025.
• More affordable BEV models are expected to become available in 2025 to meet the new emission regulations.

II. Financial Pressures & Restructuring (from “Porsche holding company warns of writedown in Volkswagen stake of up to.pdf”)

• Significant Writedown Expected:Porsche SE, the holding company, expects to write down its stake in Volkswagen by €7bn to €20bn (up to 40%). This is due to the lack of financial data from VW and uncertainty around potential plant closures and strikes.
• A writedown of €1bn to €2bn is also expected for Porsche AG.
• Porsche SE acknowledges that the book value of both stakes are significantly higher than the market value.
• Causes of Financial Difficulties:VW is facing a “structural decline in European sales of cars.”
• Sales have dropped by about 500,000 cars annually compared to pre-pandemic levels.
• VW’s share of sales in China, its most profitable market, has nearly halved due to a shift to EVs/hybrids and increased competition from local brands like BYD.
• Worker representatives believe the problem is poor product decisions rather than just cost problems.

III. Labor Disputes & Restructuring (from “VW and union talks.pdf”)

• Intense Labor Conflict:Negotiations between VW management and the IG Metall union are ongoing, with no solutions yet in sight.
• VW workers staged widespread strikes at nine German plants, the largest such industrial action at VW since 2018.
• Workers walked out for 4 hours and have threatened to escalate to 24-hour strikes or open-ended strikes.
• Unions refuse to accept plant closures, while VW has not ruled them out.
• Cost-Cutting Measures and Justification:VW is seeking to cut costs radically to compete with cheaper Asian rivals.
• VW states that overcapacity and wage reductions are needed.
• Management claims to not be able to operate in a “fantasy world”.
• Union’s Perspective:The union has accused VW management of “poor product decisions” and “destroying trust” among workers.
• The unions argue that cost-cutting alone will not solve the decline in sales.
• One union leader stated, “The brand VW is under threat of becoming damaged by the behavior of the board and the share price has been thrown to the bottom of the basement. That is the board’s responsibility.”
• Political Pressure:German Chancellor Olaf Scholz has warned VW against factory closures.
• The VW crisis is occuring at a time of uncertainty and upheaval in Germany.

IV. Key Themes and Takeaways:

• Transition Challenges: Volkswagen is struggling to adapt to the rapid shift towards electric vehicles and facing stiff competition from both established and new entrants.
• Economic Headwinds: The weak German economy and high inflation are negatively impacting consumer demand for vehicles.
• Internal Conflicts: There’s a major rift between VW management and labor unions regarding the path forward, with significant disagreements over restructuring plans.
• Financial Instability: The potential for a large writedown reflects the uncertainty and potential crisis facing the company.
• Urgency for Solutions: VW needs to address its declining sales, increasing costs, and strained labor relations to remain competitive in the changing automotive landscape.

V. Notable Quotes:

• “After today’s round it is clear we are still far from a solution,” – Volkswagen’s chief negotiator Arne Meiswinkel
• “The brand VW is under threat of becoming damaged by the behaviour of the board and the share price has been thrown to the bottom of the basement. That is the board’s responsibility,” – union leader Thorsten Groeger
• “We continue to need to reduce costs, reduce overcapacity,” – Arne Meiswinkel
• “We will now have to wait until 2025 to see if the BEV market can get back to a growth trajectory after a miserable 2024 which has suffered from a weak economy, overpriced BEVs, and few-to-no affordable options.” – Dr. Maximilian Holland

VI. Outlook:

The documents suggest a difficult period ahead for the Volkswagen Group. The combination of market challenges, financial instability, and labor unrest creates a complex and potentially volatile situation. The company needs to navigate these issues carefully to secure its future. The key will be the progress of negotiations with labor, and the success of their new affordable BEV models in 2025.

This briefing highlights the urgency for strategic decisions and effective execution by VW to overcome its current challenges and position itself for success in the future.convert_to_textConvert to source