Volkswagen (VW) may seem with its Beetle, Golf, Polo and Bus models, but the carmaker has a huge global footprint and depends on many other countries to keep the assembly lines running.
Recently, a changing auto market, especially when it comes to , and possible miscalculations by management have started to .
Home-grown and global problems
New vehicle demand is down in and may never reach pre-pandemic levels that once saw 17 million vehicles sold a year. Demand for VWs, in particular, is in the crosshairs, especially as Chinese rivals take over the global market for electric vehicles.
Last year, the VW brand, the biggest brand in the 12-brand Volkswagen Group, sold 4.80 million passenger cars worldwide, 1.4% less than in 2023, hurt by lower sales in key market China. Operating profit plummeted nearly 37% to €1.34 billion in the first three quarters of 2024 from €2.12 billion in the same period in 2023 because of higher fixed costs and restructuring, according to a company press release.
At home in Germany, . The company has announced drastic cuts. Surging energy prices since Russian gas was turned off over the Ukraine war, Chinese competition, the cost of German workers and looming tariffs amid Donald Trump’s return to the White House are making business as usual difficult.
The company said on December 20 it had reached an , with the remaining VW workforce in Germany having to forego wage increases and bonuses in the coming years.
Could Germany’s pain be a blessing for other countries that assemble Volkswagens?
Volkswagen in Europe and beyond
VW has 76,000 employees in and a further 63,000 worldwide.
Whether to be closer to customers or cheaper labor, the company has an extensive production network that stretches globally. Besides Germany, it currently has production facilities in Poland, Spain, Portugal and Slovakia.
All facilities in Russia, including a big plant, were closed and imports were stopped in 2022 after the . A year later, VW sold all its assets in the country, a move other European carmakers also made. A failed to move forward due to the pandemic.
Further afield, VW assembles vehicles in , Brazil, Mexico, the , China, India and South Africa. Outside of Europe, by far VW’s biggest investment is in , followed by a distant Mexico and Brazil.
Volkswagen’s long Brazilian history
VW’s first plant outside of Germany was opened seven decades ago in far-away Brazil. Today, is the largest manufacturer in the country, according to the company. Last year, it produced its 25 millionth vehicle.
Although South America only accounted for 8% of sales in 2023, the company is currently heavily dependent on Brazil. VW has a good reputation there and makes up a big part of the vehicles on Brazilian roads, and sales are up.
This good news has bought the company some time. However, the market is too small to compensate for losses elsewhere, and the competition is not far behind.
Doing business with the US through Mexico
In 2023, North America made up just over 10% of VW sales, but it is a very important market — one that is about to become more difficult if US tariffs are imposed on vehicles made elsewhere.
Volkswagen has a plant in Tennessee. Counting on cheaper labor and , VW also has a big facility in Mexico. Yet this plan could be thrown into the shredder and be hit by .
President-elect Donald Trump has his eyes fixed on Germany and German companies. During his presidential campaign, he said: “I want German car companies to become American car companies. I want them to build their plants here.”
Added all together German carmakers produce many vehicles inside America. Many are for the domestic market, while others are exported. Still, Volkswagen depends on European imports to cover the demand in the United States fully. Tariffs could be another hit to sales and the company’s bottom line.
China, a special and problematic case for VW
For years, Volkswagen had high hopes for business in and with China. For the past decade, the company has depended on the country for big sales growth and its manufacturing capabilities. Both are now under fire, and those .
In 2019, VW was the biggest car company in China and had a market share of 19% of the Chinese market, which is the biggest in the world. For VW, China was the company’s biggest and most lucrative market, accounting for a third of the carmaker’s total sales and a big part of its profits.
Today, VW has a Chinese market share of 14%, a figure that is falling. Domestic Chinese rivals are in the fast lane and taking sales. They are especially good at making cheap electric vehicles that customers like, so cheap that Canada, the US and EU recently hit . Nonetheless, China is now the world’s biggest exporter of cars and less dependent than ever on foreign models.
For all its long history and global footprint, Volkswagen is not immune to downturns. To make this next big curve, the company will need to refocus while paying attention to punitive tariffs, its different and diverse markets and the Chinese competition speeding toward it at warp speed.
Edited by: Uwe Hessler
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