It's been a strange and unpredictable year for electric vehicle sales in America and, frankly, for new car sales in general. But if you want to assess the European market, replace the adjectives above with "apocalyptic." Intense competition from China, a weak economy, slowing EV demand as subsidies evaporate and high interest rates have all put the European auto industry in a dismal place. Now, we know the extent of the cuts that management at Volkswagen wants to make, and they are without precedent.
This kicks off the Monday edition of Critical Materials, our morning roundup of must-read news in the tech and mobility space. And if you're just joining us, then yes, InsideEVs does look different today. (And yes, it does look better, I agree.) Check out my announcement post if you haven't already and then let's dig into some news.
30%: Volkswagen Braces For Potentially Huge Job Cuts, Plant Closures
Since its rebirth at the end of World War II, Volkswagen has never closed an auto plant aside from its ill-fated experiment in Westmoreland, Pa. in 1988. Now, it may soon try to close three in Germany alone as high labor costs, slow sales and tough regulations driving EV adoption start to take their toll.
Reuters reports today that the head of the carmaker's works council has warned the VW labor force that "a deeper-than-expected overhaul" is coming to the troubled automaker as it sprints to cut costs. Tens of thousands of jobs could be cut, up to three plants could be closed and a job security program in place since the 1990s will come to an end.
It's unclear which plants would be affected, but the moves are drastic no matter which way you want to look at them:
Europe's biggest carmaker has been negotiating for weeks with unions over its plans to revamp its business and cut costs, including considering plant closures on home soil for the first time in a blow to Germany's industrial prowess.
"Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round," Daniela Cavallo, Volkswagen's works council head, told employees at the carmaker's biggest plant, in Wolfsburg, threatening to break off talks.
"This is the plan of Germany's largest industrial group to start the sell-off in its home country of Germany," Cavallo added, not specifying which plants would be affected or how many of Volkswagen Group's roughly 300,000 staff in Germany could be laid off.
Volkswagen said in a statement that it would make proposals for how to cut labour costs on Wednesday, when workers and management meet for the second round of wage talks and the carmaker releases third-quarter results.
"The situation is serious and the responsibility of the negotiating partners is enormous ... Without comprehensive measures to regain competitiveness, we will not be able to afford essential investments in the future," Volkswagen Group board member Gunnar Kilian said.
So why is all of this happening? Demand for cars in Europe is weak in general, as the continent faced a tougher post-COVID economic recovery than even the U.S. did. Chinese automakers are eating into VW's market share on its home turf, and in China itself, buyers are turning more and more to homegrown brands instead. Subsidies to encourage EV purchases in Germany have largely gone away, and so high costs are discouraging buyers from going that route. Globally, VW's EV sales are down nearly 10% globally, including 40% in the U.S., and total global car deliveries were down 7% in Q3.
Other than that, everything seems fine.
Reuters also reports that Germany's most powerful union, IG Metall, has identified a few possible contenders for plant closures. Those include the Brunswick plant that makes various components and EV batteries; the Emden plant that makes the Passat and ID.4; the Hanover plant that makes vans and minivans; and a few others. About 300,000 people work for VW in Germany alone. But this is part of the problem, VW brand CEO Thomas Schaeffer said: "We are not earning enough money with our cars currently. At the same time, our costs for energy, materials and personnel have continued to rise. This calculation cannot work in the long term. So we have to get to the root of the problem: we are not productive enough at our German sites and our factory costs are currently 25-50% higher than we had planned. This means that individual German plants are twice as expensive as the competition."
And as those stories note, these potential closures have profound implications for the European economy, Germany's elections next year and the global EV transition as a whole. But it's becoming increasingly clear that if VW doesn't change how it operates, it may not be around to see the other side of that transition.
60%: GM Pushes Back As Canada Mulls Ending EV Subsidies
There remains this ongoing question as to how long governments should provide incentives to buy electric cars. Do them for too long, the argument goes, and you overly subsidize a private market. Pull the subsidies too soon and you kill EV sales right as they're about to take off and make it tougher for the automakers to meet their aggressive emissions and fuel economy targets in the future. Germany and other countries in Europe have pulled their subsidies in recent months and the effect on EV sales has been palpable.
So naturally, General Motors isn't happy that governments in Canada—where several provinces are doing very well with EV adoption—are considering pulling back on subsidies too. Canada has deficits to deal with so those incentives may be on the table, Bloomberg reports:
At the moment, some consumers can get as much as C$12,000 ($8,673) off the price of an electric car. Federal rebates deduct as much as C$5,000, while the province of Quebec chips in as much as C$7,000 and British Columbia offers a maximum of C$4,000.
But government officials looking at large budget deficits are now reining in the use of taxpayer cash. In March, Quebec said it will phase out subsidies by 2027. In June, British Columbia significantly narrowed the availability of its rebate, citing “available funding” and faster-than-expected EV sales growth.
Meanwhile, the Canadian government has set an aggressive target for phasing out gasoline-powered vehicles.
It’s mandating that all new light-duty vehicles sold by 2035 must be electric or plug-in hybrid. There are interim targets of 20% by 2026 and 60% by 2030. Under Canada’s proposed system, automakers get compliance credits for EV sales and infrastructure investments, but incur deficits for falling short. Some provinces have their own targets — BC’s threatens manufacturers with financial penalties for shortfalls.
“Just as mandates and regulations start to bite, the timing is not necessarily lining up very well, in that the purchase incentive support comes off,” GM Canada President Kristian Aquilina said in an interview with Bloomberg News in Vancouver. “It will have to have an impact. So we cannot ignore that.”
As that story notes, Ontario canceled its consumer rebate in 2018. But other provinces like Quebec and British Columbia have aggressive programs to get people to go electric and now GM's EV sales in Canada were at a very impressive 12.5% in Q3. But if the Conservative Party of Canada wins the next election, those subsidies could especially be on the chopping block.
90%: Waymo Raises Cash
Finally, some good news for fans of robotaxi services: you may see more of the leading one in your city soon enough. Google's Waymo division just raised another $5.6 billion, CNBC reports, earmarked for expansion efforts:
In a statement to CNBC, Waymo co-CEOs Tekedra Mawakana and Dmitri Dolgov said the funding would go toward expansion and advancing the Waymo Driver for business applications.
“With this latest investment, we will continue to welcome more riders into our Waymo One ride-hailing service in San Francisco, Phoenix, and Los Angeles, and in Austin and Atlanta through our expanded partnership with Uber,” they wrote.
The series C funding brings Waymo’s total capital raised to more than $11 billion after it raised $3.2 billion and $2.5 billion in two earlier rounds. Alphabet CFO Ruth Porat announced in July that the parent company would commit to a multiyear investment of up to $5 billion in Waymo.
100%: How Does Volkswagen Get Past This Crisis?
What's your prescription for VW's woes in China, and what do they mean for the rest of the industry?
Contact the author: patrick.george@insideevs.com
