Volkswagen Moves Historic Factory Out of Germany: Putin's Warning Comes True

According to CNN, Volkswagen is thinking about closing its factory in Germany, which has been there for 87 years. The car company is trying to cut costs because of more competition from Chinese electric car makers. On September 2, Volkswagen said they might have to close the factory in their home country.

Volkswagen's CEO, Oliver Blume, said "The European car industry is in a very difficult and serious situation. The economic environment is getting tougher, and new competitors are entering the European market. Especially Germany as a production location is falling behind in competitiveness." 

Volkswagen started trying to cut costs by 10 billion euros (11.1 billion USD) at the end of last year. They are losing market share in China, their biggest market. In the first half of the year, the number of cars delivered to customers in China dropped by 7% compared to the same period in 2023. The group's operating profit fell 11.4% to 10.1 billion euros (11.2 billion USD).

Their poor performance in Chine is happening because they are losing to local electric car brands, especially BYD, which is also becoming a bigger threat to their business in Europe.

Blume told analysts that company had to cut costs in areas like factory expenses, supply chains, and labor. "We have done all the necessary organizational steps. Now it's about costs, costs, and costs," he added.

Volkswagen said, "The current situation is extremely tense and cannot be solved through simple cost-cutting measures."

According to the latest earnings report, Volkswagen employs nearly 683,000 workers worldwide, including about 295,000 in Germany.

Thomas Schaefer, the CEO of Volkswagen Passenger Cars, said the company is still committed to Germany as "a business location." He added that VW will quickly start talks with employee representatives to explore the possibilitiy of "substainably restructuring the brand."

The ongoing crisis in Germany's car industry and European industries, in general, was warned by Russian President Vladimir Putin not long ago. He mentioned that Europe's decision to stop using Russia's clean and cheap gas and switch to expensive American liquefied natural gas (LNG) would cause European industries to collapse.

Earlier in February, when asked about Russia's role in boosting Germany's car industry, Russian President Vladimir Putin said, "They are ruining their own car industry and clearly need help in some way."

For more than a year, Germany's industry, especially in the car sector, has faced many challenges. The increase in energy prices after Germany lost gas from Russia has reduced the competitiveness of manufacturers.

Last year, Hildegard Muller , President of the German Association of the Automotive Industry (VDA), warned that high energy costs are causing "serious losses in international competitiveness," leading many companies to consider moving production elsewhere.