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

Matt Posky
by Matt Posky
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]

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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!

  • Bullnuke Well, production cuts may be due to transport-to-market issues. The MV Fremantle Highway is in a Rotterdam shipyard undergoing repairs from the last shipment of VW products (along with BMW and others) and to adequately fireproof it. The word in the shipping community is that insurance necessary for ships moving EVs is under serious review.
  • Frank Wait until the gov't subsidies end, you aint seen nothing yet. Ive been "on the floor" when they pulled them for fuel efficient vehicles back during/after the recession and the sales of those cars stopped dead in their tracks
  • Vulpine The issue is really stupidly simple; both names can be taken the wrong way by those who enjoy abusing language. Implying a certain piece of anatomy is a sign of juvenile idiocy which is what triggered the original name-change. The problem was not caused by the company but rather by those who continuously ridiculed the original name for the purpose of VERY low-brow humor.
  • Sgeffe There's someone around where I live who has a recent WRX-STi, but the few times I've been behind this guy, he's always driving right at the underposted arbitrary numbers that some politician pulled out of their backside and slapped on a sign! With no gendarmes or schoolkids present! Haven't been behind this driver on the freeway, but my guess is that he does the left lane police thing with the best of 'em!What's the point of buying such a vehicle if you're never going to exceed a speed limit? (And I've pondered that whilst in line in the left lane at 63mph behind a couple of Accord V6s, as well as an AMG E-Klasse!)
  • Mebgardner I'm not the market for a malleable Tuner / Track model, so I dont know: If you are considering a purchase of one of these, do you consider the Insurance Cost Of Ownership aspect? Or just screw it, I'm gonna buy it no matter.The WRX is at the top of the Insurance Cost pole for tuner models, is why I ask.