Volkswagen CEO Expresses Concerns Over Brand Competitiveness
The Chief Executive Officer (CEO) of Volkswagen Group’s core brand, VW, has raised alarm bells about the brand’s lack of competitiveness. This warning comes as VW aims to enhance its return on sales and expand its market presence in the electric vehicle (EV) sector in China.
During a staff meeting, Thomas Schäfer, the CEO of the VW brand, highlighted the brand’s loss of competitiveness due to existing structures, processes, and high operational costs. This information was disseminated through an internal website and subsequently reported by Reuters.
VW is on the cusp of implementing a cost-cutting plan totaling 10 billion euros, approximately $10.9 billion. While this initiative will involve reducing the workforce, the reductions are expected to occur through agreements related to partial retirements or early retirements.
It’s noteworthy that VW has previously outlined its intention to reduce staff numbers without resorting to significant layoffs, particularly throughout the current decade. This approach leverages the aging workforce of the company.
In a bid to control expenditures, the automaker made a significant announcement in September by abandoning plans for constructing a second plant at its headquarters in Wolfsburg, Germany. Instead, VW will optimize capacity utilization at its existing manufacturing facilities.
Despite being the highest-selling brand within the VW Group, the VW brand faces challenges with its return on sales, which is currently the lowest in the group. In an investor presentation earlier this year, VW set an ambitious goal of increasing its return on sales from 3.6% (as recorded last year) to 6.5% by 2026.
Another hurdle for the company is its relatively low market share in EVs in China, the world’s largest market for both conventional vehicles and EVs. In an effort to accelerate EV development tailored to the Chinese market, VW entered into a partnership earlier this year with Xpeng. This strategic alliance grants VW access to some of Xpeng’s EV platforms. Similarly, Audi, another brand within the VW Group, inked a similar agreement with China’s SAIC this year.
Moreover, VW Group has witnessed a slowdown in EV sales in its home market of Europe. When revealing its third-quarter results last month, the automaker revised its projections, now anticipating that EV sales will constitute between 8% and 10% of its total sales this year, down from the initial target of 11%.
Frequently Asked Questions (FAQs) about Competitiveness
What is the main concern raised by VW’s CEO in this text?
VW’s CEO, Thomas Schäfer, expresses apprehension about the brand’s diminishing competitiveness due to existing structures, processes, and high operational costs.
What cost-cutting measures is Volkswagen planning to implement?
Volkswagen is planning to reduce costs by approximately 10 billion euros, which includes staff reductions through agreements on partial or early retirements.
What is VW’s approach to reducing staff numbers without layoffs?
VW intends to utilize its aging workforce to reduce staff numbers without resorting to significant dismissals, particularly throughout the current decade.
What strategic move did VW make to enhance its EV presence in China?
To expedite EV development for the Chinese market, Volkswagen partnered with Xpeng, granting access to some of Xpeng’s EV platforms.
What is the revised projection for EV sales in Europe by VW Group?
VW Group now expects EV sales to comprise between 8% and 10% of its total sales this year, down from the initial target of 11%.
More about Competitiveness
- Volkswagen CEO Highlights Lack of Competitiveness
- Volkswagen’s 10 Billion Euro Cost-Cutting Plan
- VW’s Strategy to Reduce Staff Numbers
- Volkswagen’s EV Partnership with Xpeng
- VW Group’s Revised EV Sales Projection