Weak Demand Leads VW to Temporarily Halt Production at EV Plants

German automaker Volkswagen has revealed that it is pausing EV production at two manufacturing plants in response to weak electric vehicle demand. The carmaker will suspend production at the Zwickau and Dresden facilities for a week in October and plans to cut the working week at an EV production plant in Osnabrück, Lower Saxony, by one day. 

Volkswagen joins a growing number of automakers who have paused or scaled back battery electric vehicle (BEV) production due to low market demand. While Chinese automakers can now produce and sell their electric cars at incredibly low costs, Western automakers still spend more on electric vehicle production, forcing them to sell their cars at much higher prices compared to similar fossil fuel-powered cars. 

As a result, Chinese electric cars can be quite affordable and often cost as much or even less than gas-powered cars, while Western-made electric cars typically sell for a premium. For consumers grappling with inflation and a worsening cost of living crisis, expensive electric cars are the absolute last thing on their minds. 

Consequently, Volkswagen is pausing BEV production at two facilities and reducing the workweek at a third facility by one day. The Zwickau plant currently manufactures six fully electric models for Audi, Cupra, and Volkswagen. Given Germany’s and Volkswagen’s notable positions in the European Union’s automotive sector, VW’s decision to pause production is emblematic of the challenges the EU has faced in its transition to fully electrified cars and may be seen as a major blow to the Union’s EV transition. 

In addition to the two plants at Dresden and Zwickau, Volkswagen is also considering temporarily halting production at a fourth Emden-based plant which produces both the Volkswagen ID.7 and ID.4. The Zwickau plant initially produced internal combustion engine cars but was retrofitted for EV production after over one century of internal combustion engine vehicle production, building its last combustion engine in 2020 before fully transitioning to EV production. 

According to a spokesperson from Volkswagen, the carmaker will adjust its production schedules to match current market demand, with some facilities losing shifts and others gaining shifts in the next few weeks. 

Stellantis, which produces several electric cars across several brands, including the Fiat 500e, Jeep Avenger, Peugeot E-3008, Dodge Charger Daytona, Leapmotor C10, and Maserati GranTurismo Folgore, has also revealed that it will pause production at several facilities in the EU due to low consumer demand. All signs indicate that EU-based automakers are struggling to sell their electric cars to an increasingly uninterested market. 

Other Western players in the auto market, such as Massimo Group (NASDAQ: MAMO), need to quickly come up with strategies to prevent what is happening in Europe from impacting their North American operations. 

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