Authors: Timothy Rooks | Bartosz Dudek Polish version
In 2024, the entire Volkswagen Group sold over 9 million cars worldwide. That's 2.3 percent. less than in the previous year – according to the latest data published, among others, by Der Spiegel magazine.
Record profits are already a thing of the past for Volkswagen. The automotive market is changing dramatically, especially when it comes to electric vehicles. In addition, there are erroneous decisions made by VW's management, which threaten its success companies.
Internal and global problems
Demand for new vehicles in Europe is falling and may never return to pre-coronavirus levels, when 17 million vehicles were sold annually. In particular, demand for electric Volkswagens has fallen as Chinese competitors take over the global electric vehicle market. The VW brand itself – the largest of the group's twelve brands – is having big problems.
In 2024, 4.8 million vehicles were sold worldwide under the VW brand, 1.4 percent more than less than in the previous year. Operating profit fell by almost 37%. from EUR 2.12 billion in the first three quarters of 2023 to EUR 1.34 billion in the same period of 2024. Reason: higher fixed costs and restructuring.
In Germany, VW is in trouble. The company announced drastic cuts. Rising energy prices since the significant end to Russian supplies gasChinese competition, high German labor costs and the threat of US tariffs require a change of course.
On December 20, 2024, the company announced that it had reached an agreement with trade unions to reduce 35,000 jobs. jobs, and remaining VW employees in Germany will have to give up wage increases and bonuses in the coming years.
Volkswagen in Europe and around the world
VW employs 76,000. employees in Germany and another 63 thousand all over the world. Whether due to customer proximity or cheaper labor, the company has an extensive network of manufacturing plants around the world. In addition to Germany, there are currently production plants in Poland, Spain, Portugal and Slovakia.
After the invasion of Ukraine in 2022, all plants in Russia, including the large factory in Kaluga, were closed and imports stopped. A year later, VW sold all its assets in the country, which other European carmakers also did. The planned opening of a factory in Turkey was not carried out due to the COVID-19 pandemic.
VW also assembles vehicles in ArgentinaBrazil, Mexico, USA, China, India and South Africa. Outside Europe, VW's largest investments are in China, followed by Mexico and Brazil.
Volkswagen's long Brazilian history
The first VW factory outside Germany opened in Brazil seven decades ago. Today, according to the company, Volkswagen do Brasil is the largest manufacturer in the country. The 25 millionth vehicle was produced last year.
And while South America accounted for only eight percent of sales in 2023, the company is currently heavily dependent on Brazil. VW enjoys a good reputation there, and a large proportion of the vehicles on Brazilian roads are Volkswagens. Sales are also growing.
However, this market is too small to offset losses in other regions – and the competition is not far away.
Trump threatens tariffs
Although North America accounts for only a little over 10 percent. VW sales in 2023, it's a key yet difficult market that could become even more difficult if the U.S. imposes tariffs on vehicles made elsewhere.
Volkswagen has a factory in the US state of Tennessee. But because VW also relies on cheaper labor and the free movement of goods under the USMCA North American Free Trade Area, the company also has a large plant in Mexico. However, this strategy may be threatened by US tariffs.
US President-elect Donald Trump has his eye on Germany and German companies. During the campaign election he said he wanted “German car companies to become American car companies. I want them to build their factories here.”
Generally, German automakers produce a large number of vehicles in the US. Many of them are intended for the local market, others are exported. However, Volkswagen also depends on imports from Europe to fully meet demand in the United States. The tariffs Trump is threatening could therefore deal another blow to VW Group's sales and business results.
China's special role is problematic
For years, Volkswagen has had high hopes for its operations in China. Over the past ten years, the company has built on this country, achieving strong sales growth and expanding its production capacity. Both of these are now on the verge of collapse, and VW's Chinese dream may be coming to an end.
In 2019, VW was the largest carmaker in China and had a 19 percent market share in what is now the world's largest car market. For VW, China was the company's most important and lucrative region, accounting for a third of total sales and a large share of profits.
Currently, VW's share in the Chinese market is 14 percent, with a decreasing trend. Domestic Chinese competitors are growing at a rapid pace and selling more and more vehicles. They are particularly good at producing cheap electric cars that are well received by customers – so cheap that Canada, the US and the EU recently imposed additional tariffs on Chinese electric cars. Today, China is the world's largest car exporter and is less dependent than ever on foreign models.
Despite its long history and global presence, Volkswagen is not immune to the economic slowdown. To overcome the next big corner, the company must refocus on punitive tariffs, different and diverse markets, and Chinese competition that is closing in on VW at unimaginable speed.
Bartosz Dudek Editor-in-chief of the Polish Section of DW
The article comes from the website Deutsche Welle.