Volkswagen manufactures and sells vehicles worldwide. The concern is originally German, but is also at home in China, Brazil and the USA. That dependence on foreign markets could soon take its revenge, he writes Deutsche says.
Volkswagen is German proizvođač cars, but it operates globally and depends on many other countries to keep its production lines running.
Volkswagen - the largest of the twelve brands of the eponymous concern - produced more than 2023 million cars worldwide in 4,8 and generated revenue of over 86 billion euros ($90,2 billion). That's an increase of 17 percent compared to the previous year, according to data from the annual report published in March 2024.
But those good times are in the past. The market has changed considerably in the meantime, especially when it comes to electric vehicles. And then there are the wrong assessments of the management of Volkswagen that threaten the success of the company.
Domestic and global problems
Demand for new vehicles in Europe is falling and may never reach new levels since before the corona pandemic when 17 million vehicles were sold annually. Demand for Volkswagen vehicles in particular has fallen since Chinese competitors have taken over the global electric vehicle market.
In the first nine months of last year, Volkswagen sold 2,26 million vehicles worldwide. It is slightly more than in the same period of the previous year and the income has increased slightly. However, according to the concern, the operating profit fell by almost 37 percent - from 2,12 billion euros in the first three quarters of 2023, to 1,34 billion euros in the same period last year. The reason: higher fixed costs and restructuring.
At home in Germany, Volkswagen is in a tense situation. The company announced drastic cuts. Rising energy prices following the cessation of Russian gas supplies, Chinese competition, high German labor costs and looming US tariffs all require a change of direction.
As the company announced on December 20 last year, an agreement was reached with the unions on the gradual elimination of 35.000 jobs, while the remaining Volkswagen workers in Germany will have to give up salary increases and bonuses in the coming years.
Can other countries profit from problems at Volkswagen sites in Germany?
Volkswagen in Europe and around the world
Volkswagen employs 76.000 workers in Germany and an additional 63.000 worldwide.
Either because of proximity to customers or because of cheaper labor - the company has a large network of production locations in the world. Apart from Germany, there are currently production facilities in Poland, Spain, Portugal and Slovakia.
After the invasion of Ukraine in 2022, all plants in Russia were closed, including one large factory, and imports were halted. A year later, Volkswagen sold all of its assets in the country, as did other European automakers. A planned factory in Turkey was not realized due to the Covid pandemic.
In addition, Volkswagen manufactures vehicles in Argentina, Brazil, Mexico, USA, China, India and South Africa. Outside of Europe, Volkswagen's largest investments are in China, followed by Mexico and Brazil.
Volkswagen's long Brazilian history
The first Volkswagen factory outside Germany was opened seven decades ago in distant Brazil. It's today Volkswagen do Brasil, according to the company, the largest producer in that country. Last year, the 25 millionth vehicle was produced.
Although South America accounted for only eight percent of sales in 2023, Volkswagen is currently very dependent on Brazil. The company enjoys a great reputation there and a large part of the vehicles on Brazilian roads come from Volkswagen. In addition, sales are increasing.
The positive news from Brazil somewhat eases the situation for the concern, but that market is still too small to compensate for losses in other regions - and the competition is not far away.
Mexico as a gateway to the American market
Although North America accounted for just over ten percent of Volkswagen's sales in 2023, it is a key market. But it's also a tough market – and it could get even tougher if the US imposes tariffs on foreign-made vehicles.
Volkswagen has a factory in the US state of Tennessee. But, given that the concern also counts on cheaper labor, as well as the free flow of goods within the North American free trade zone USMCA, Volkswagen also has a large factory in Mexico. That strategy, however, could be undermined by new US tariffs.
President-elect Donald Trump said: "I want German car companies to become American car companies." I want them to build their factories here."
German car manufacturers produce a variety of vehicles in the US. Many are intended for the local market, and others for export. However, Volkswagen is still dependent on European imports to fully meet US demand. Trump's threats of tariffs could further threaten the business results of the Volkswagen Group.
The problematic and special role of China
For years, Volkswagen had high hopes for doing business in and with China. During the last decade, the concern relied on that country, because it enabled a large growth in sales and the expansion of production capacities. Both are now in jeopardy, and Volkswagen's Chinese dream could be over.
In 2019, Volkswagen was the largest car manufacturer in China and had a market share of as much as 19 percent in what was then the world's largest car market. For Volkswagen, China was the most important and profitable region, accounting for a third of the total revenue and a large part of the profit.
Today, Volkswagen has a market share of 14 percent in China, and it is trending downward. Domestic Chinese competitors are selling more and more vehicles. They are particularly good at producing cheap electric cars that are popular with customers – so cheap that Canada, the US and the EU have recently imposed additional tariffs on Chinese electric vehicles. 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 setbacks. In order to successfully overcome the upcoming major changes, the concern must adapt and take into account customs duties, the diversity of the market, as well as the Chinese competition, which is catching up with Volkswagen at an incredible speed.
