Volkswagen Confirms Brand “No Longer Competitive”, Take Measures to Keep Up with the Market

Nov 28, 2023 06:32 AM EST

Red Beetle parked at the roadside near pedestrian lane — (Photo : PEXELS/Ahmad Ramadan)

Volkswagen has held a strong position in Europe for many years, with the Golf as a top-selling car for an extended period. However, recent years have seen shifts in the landscape. Toyota is gaining ground, and the influence of Stellantis, which encompasses several brands, is on the rise.

The Confirmation

Volkswagen's original brand is facing a loss of competitiveness, as stated by the company's brand chief, Thomas Schaefer, due to elevated expenses and diminished productivity. During a meeting at Volkswagen's headquarters in Wolfsburg, Germany, Schaefer informed staff this, according to the company's internal communication tool, Reuters reported.

As its parent business, the VW Group, produces more electric vehicles, the firm has been working to improve the financial performance of its Volkswagen brand. CNN Business shared some details on its website.

Same information came out from elecktre. As purchasers switch to electric vehicles, Volkswagen is struggling to stay up. Schaefer, VW's CEO, warned, "The company is no longer competitive." Monday saw more job layoffs and this news.

Rising inflation and higher interest rates, along with the discontinuation of electric vehicle incentives in Germany, have created a challenging scenario for VW. Additionally, the company is grappling with growing competition from EV industry leaders Tesla and BYD, who are gaining market share in VW's primary markets.

Volkswagen's Solution

Among Volkswagen Group's mass-market brands, such as Škoda and Seat, the VW brand stands out with significantly higher sales volumes but the lowest operating profit margins in the first quarter of this year, as indicated in a corporate presentation. The company's goal is to elevate the VW brand's return on sales from 3.6% in the previous year to 6.5% by 2026, as outlined in an investor presentation.

Volkswagen has publicly expressed its commitment to improving the performance of all its mainstream brands through measures like better differentiation and eliminating redundant spending. Gunnar Kilian, an HR board member, stressed the need to cut redundancy and waste to improve results.

As one of the world's largest automakers, Volkswagen is currently in negotiations with its works council to implement a cost-cutting scheme, particularly for the VW brand, as the initial step in an efficiency drive during the transition to electric vehicles. This €10 billion (.9 billion) savings program includes staff reductions and other measures, with a focus on cost-saving initiatives set to save 10 billion euros (.9 billion) by 2026.

Volkswagen Group's CEO, Oliver Blume, has set a target to increase the VW brand's returns to 6.5% within the next three years, a significant improvement from its current rate of around 3.6%. The company plans to decrease workforce through demographic trends and early or partial retirement. Beyond job layoffs, most of the savings will come from other measures, which will be revealed by year's end.

Motor1.com reported that Volkswagen is looking for funds to support its electric plans. They're focusing on the SSP platform, which will be used for various models, including the next-gen electric Golf. They're also working on the MEB platform to make it more affordable for smaller, front-wheel-drive electric cars like the ID.2.