Volkswagen is in a weird place with its EV program. The automaker has committed to spending billions more to support it, but its ambitious goals aren't really happening as planned. Executives believe that it's a market problem—and that's not boding well with decision makers at VW.
Welcome back to Critical Materials, your daily roundup for all things EV and automotive tech. Today, we're chatting about Volkswagen sounding the alarms over EV spending, BYD pausing its plans for a plant in Mexico until the U.S. election is over, and more Ultium workers voting to join the UAW. Let's jump in.
30%: Volkswagen Says It Has Two Years To Get It Together
Volkswagen is facing some serious pressure right now. Its EV plans have turned into "a catastrophe"—those are Volkswagen's own words—and the automaker is weighing plant closures in Germany for the first time in 87 years.
VW CFO Arno Antlitz acknowledged the hardship earlier this week when speaking with more than 25,000 workers about the brand's future in Wolfsburg, Germany. During the staff meeting, Antlitz told employees that they needed to work with management to cut spending in order to help the brand survive as it shifted towards electrification.
He also gave a timeline of "one, maybe two" years to turn the brand around.
Some additional context from Reuters:
[Antlitz] told the meeting at Volkswagen's Wolfsburg headquarters that Europe's car market had shrunk after the pandemic and the company was facing a shortfall in demand of about 500,000 cars, equivalent to about two plants.
"The market is just not there," he said according to excerpts of his speech, adding he did not expect sales to recover and the core VW brand had "one, maybe two" years to cut spending and adjust output.
"There are no more cheques coming from China," added CEO Oliver Blume, referring to falling profits in Volkswagen's biggest market, according to a person at the meeting.
The stark warning reflects mounting challenges for Europe's car giants, including Stellantis and Renault, amid high labour and energy costs as well as rising competition from lower-cost Asian rivals shipping more cars to the region.
Workers saw the comments as a slap in the face. The chief of the VW works council, Daniela Cavallo, said that leadership "massively damaged trust" with the employees, especially as Volkswagen recently pushed through a $5 billion software deal with Rivian following a fractured relationship with its CARIAD division.
"Management has broken a taboo in a major way, and workers are prepared to be there when we call on them," said Cavallo.
There are other problems, though. One of the perfect examples is the recent reveal of the pricing for the U.S.-bound Volkswagen ID Buzz which starts north of $60,000 when including destination charges. The cost, coupled with as little as 231 miles of range, sent U.S. customers over the edge and had many questioning if Volkswagen knows what its customers even want anymore.
Volkswagen is working through negotiations with its workers for a successful future that doesn't result in plant closures, but the notion that it is even considering that route could have major implications in both employee and consumer trust. Couple that with the reputation hit from the decade-old Dieselgate scandal still weighing heavy on the brand's shoulders, and there's some alarms sounding.
The real question here is: what happens after the two years are up if things haven't improved in Wolfsburg? It's possible that the automaker push through with plant closures, or perhaps it has something a bit more drastic involving production plans behind the curtain. Let's hope the marque can pull itself above water before then.
60%: BYD Pauses Mexico Plant Until After U.S. Election
If you haven't been living under a rock, you'd know that Chinese automaker BYD is absolutely killing it right now. The automaker has skyrocketed up the sales ladder, positioning itself directly behind Toyota and Volkswagen. But that doesn't mean it will be expanding into North America as quickly as it thought.
The automaker has officially pushed pause on its investment into a plant in Mexico, according to new a report from Automotive News. Individuals familiar with the company's plans say that the brand is waiting for a bit of uncertainty to clear up before it moves forward with announcing any manufacturing plans in the country. What is that uncertainty, you may ask? Well, just a little thing called the U.S. presidential election.
Here's a snippet from Automotive News on the topic:
China’s top electric-vehicle maker BYD won’t announce a major plant investment in Mexico until at least after the U.S. election, according to people familiar with the matter, as shifting American policy forces global businesses into wait-and-see mode.
[...]
The postponement is largely because BYD would prefer to wait and see the outcome of the race between former President Donald Trump and Vice President Kamala Harris in early November, the people said. They added that BYD’s paused factory plans may still be revived or could change, and no final decision has been made.
But just why would the outcome of the presidential election affect BYD building a plant in Mexico? After all, the automaker said that it had "no plans" to enter the U.S. market, and despite gearing up for an entry into Canada, its plant in Mexico would only build vehicles for that market.
Canada recently announced that Chinese EVs would be subject to an additional 100% import tariff, a move which followed in the footsteps of the Biden administration's plan to do the same in the States. So while it would be strategic to build a plant on the same continent, current plans in Canada and the U.S. wouldn't allow for favorable tax-free imports of BYD's vehicles into either market without big changes.
Former U.S. President and current candidate, Donald Trump, spoke highly in favor of the tariffs on Chinese-built cars. In fact, Trump called for more tariffs on other types of vehicles and products. However, in recent weeks, he has also called for an across-the-board duty fee schedule of "more than" 60%, which would give a bit of a break to automakers looking to import vehicles versus the currently planned 100%.
While this doesn't outright signal BYD's unwritten plan to break into the U.S., it's hard to ignore the writing on the wall.
90%: GM's Ultium Plant Votes To Unionize
The majority of the 1,000 workers employed at General Motors' Ultium cell plant in Spring Hill, Tennessee have voted to join the United Auto Workers Union.
The Tennessee plant isn't the first Ultium plant to unionize. That honor goes to GM's plant in Lordstown, Ohio which voted unionized in 2022. Following that vote and the larger UAW strike of 2023, workers of the Ultium Cells subsidiary reached a "major breakthrough" as future battery manufacturing jobs would be covered under the UAW's Master Agreement.
The move is a key development for the UAW, which has been working to expand its footing across the EV battery manufacturing space. Most battery plants aren't unionized, including those serving automakers like Ford and Stellantis, which also have assembly plants covered by the UAW today. This is partly due to these plants being joint ventures between the automaker and a well-established battery maker. For example, Ultium is a joint venture between General Motors and LG.
Additionally, the unionization gives the UAW a stronger footing in the South, a region that has historically proven difficult to unionize.
Earlier this year, workers at Volkswagen's Chattanooga plant voted to join the UAW, making it the first "foreign" automaker to unionize in the Southern U.S. Employees at a Mercedes-Benz plant in Alabama also attempted to organize, but the vote was unsuccessful.
100%: What Did VW Get Wrong About EVs?
Volkswagen seems to have a hard time selling its cars. The brand claims that the real problem is the market, which, to its credit has been a bit rocky and certainly much slower to adopt EVs than many automakers originally anticipated. But the market can't be all to blame here.
Volkswagen has been stuffing money into EV investments—so has the rest of the inventory. Its EV sales haven't been great though, and even decreased to a below-industry-average of 7.3% earlier this year.
It's not clear why consumers aren't buying VW's EVs. Could it be that there are still software issues to work out? Maybe its offerings aren't enticing enough for the average consumer. Or, perhaps Volkswagen didn't get anything wrong and the market truly is just "not there," as the brand says.
What do you think? Let me know in the comments.
