Volkswagen Shifting Production Out of Europe, Into U.S. and China

volkswagen shifting production out of europe into u s and china

Volkswagen Group will be moving some of its European production out of the continent and into facilities located in China and the United States, citing the war in Ukraine as the largest contributing factor. Though if you’ve been following the company, it had already signaled a desire to raise its capacity in China ever since the region shifted into becoming its largest market.

In fact, Chief Executive Herbert Diess said during Tuesday’s press call that China will be taking precedence as the automaker reorganizes its manufacturing.

“We will shift more into China because of the situation in Europe,” the CEO explained, mentioning limited access to parts and raw materials since the war began.

According to Reuters, Diess was also asked how VW would respond when and if China invaded Taiwan. He said he wasn’t concerned, stating that it was his belief China would not launch such an attack.

“China has a high interest to keep borders open,” Diess said. “We think it is an asset for us to be strong in China. China is a stronghold for us.

From Reuters:

The carmaker has suspended production in Russia following the country’s invasion of Ukraine.

A lack of wire harnesses normally sourced from Ukraine was the most significant supply chain constraint at the moment, Diess said, affecting most German plants. If it could not relocate production in 3-4 weeks, its outlook would need to be revised, Diess said.

VW executives have previously hinted that China was becoming their biggest priority and with good reason. The company outsells every other brand on the Chinese market by nearly a million vehicles annually. Volkswagen presently enjoys a 16 percent market share for the region and believes it can do even better as it increases electric vehicle sales over the next several years. Meanwhile, the European zone is highly developed and looking quite beleaguered — especially as inflation stemming from the pandemic has been made worse by the Russo-Ukrainian War.

While that could change once the conflict ends, Diess believes the comedies market will remain extremely volatile until at least 2026. With prices on nickel and palladium soaring, modern EV batteries are seeing massive price increases. But even steel is getting increasingly expensive and the further supplies have to travel, the more expensive they end up becoming. Still, it’s curious to see Volkswagen Group make special mention of the United States when Western Europe typically sees far more deliveries annually.

Regardless, the company said it expects vehicles to become even more expensive this year due to the price of raw materials. It’s also already done some heavy restructuring by cutting overhead in 2021, resulting in roughly $4.4 billion of freed capital. This was after labor union IG Metall accused VW leadership of having grotesquely mismanaged the company for years, risking thousands of German jobs and the company’s own reputation, in 2020.

[Image: Volkswagen]

Join the conversation
3 of 17 comments
  • Kars Kars on Mar 15, 2022

    and when China invades Taiwan how do you think having plants in China will play out?

    • Superdessucke Superdessucke on Mar 15, 2022

      It will be a head-slapping V8 moment, coupled with a request for assistance. The labor (not needed because of automation of course...wink) is so cheap, they think it's worth the risk. This is, how shall we say, a subterfuge.

  • Theflyersfan Theflyersfan on Mar 16, 2022

    I think they need to nuke their plants from orbit unless they can fix just a few quality issues. I think a big smoking crater where an auto plant used to be might provide enough motivation to make sure everything works before they rush it out the back door. @FreedMike: it's in the US awaiting a transport truck to drive it out east. Yet another delay - there aren't enough drivers out there who make these trips!

  • FreedMike Back in the '70s, the one thing keeping consumers from buying more Datsuns was styling - these guys were bringing over some of the ugliest product imaginable. Remember the F10? As hard as I try to blot that rolling aberration from my memory, it comes back. So the name change to Nissan made sense, and happened right as they started bringing over good-looking product (like the Maxima that will be featured in this series). They made a pretty clean break.
  • Flowerplough Liability - Autonomous vehicles must be programmed to make life-ending decisions, and who wants to risk that? Hit the moose or dive into the steep grassy ditch? Ram the sudden pile up that is occurring mere feet in front of the bumper or scan the oncoming lane and swing left? Ram the rogue machine that suddenly swung into my lane, head on, or hop up onto the sidewalk and maybe bump a pedestrian? With no driver involved, Ford/Volkswagen or GM or whomever will bear full responsibility and, in America, be ambulance-chaser sued into bankruptcy and extinction in well under a decade. Or maybe the yuge corporations will get special, good-faith, immunity laws, nation-wide? Yeah, that's the ticket.
  • FreedMike It's not that consumers wouldn't want this tech in theory - I think they would. Honestly, the idea of a car that can take over the truly tedious driving stuff that drives me bonkers - like sitting in traffic - appeals to me. But there's no way I'd put my property and my life in the hands of tech that's clearly not ready for prime time, and neither would the majority of other drivers. If they want this tech to sell, they need to get it right.
  • TitaniumZ Of course they are starting to "sour" on the idea. That's what happens when cars start to drive better than people. Humanpilots mostly suck and make bad decisions.
  • Inside Looking Out Why not buy Bronco and call it Defender? Who will notice?