By Mike Ochonma.
Volkswagen is putting the brakes on its electric vehicle production as rising electricity costs and lowering gas prices, as well as disappearing subsidies, have changed the calculation for buyers in its main markets.
Citing ‘softening demand’ for electric vehicles, Volkswagen automakers (VW), says it will be pausing their production at one of its major manufacturing plants and laying off a fifth of the workforce there.
After missing its sales forecast by 30%, VW will idle its dedicated EV factory in Emden for six weeks and will lay off 300 out of the 1,500 auto workers there.
Company sources say VW overestimated interest in electric cars by 30 percent with the unavoidable backlash of laying off EV auto workers as gas prices drop.
Rising electricity prices and lower gasoline have also affected the buying prospects, too, as EVs are still far more expensive than gas-powered cars.
The move comes in contrast to the success stories that other EV makers logged this past quarter, with Tesla, BYD, Rivian and others all notching record delivery numbers.
According to a statement by Volkswagen UK: The Volkswagen brand, like other car manufacturers, is currently seeing softening demand for electric cars. Reasons for this include: reduced subsidies, higher inflation and recent longer delivery times due to the shortage of parts. The automaker said it is confident that demand for all-electric cars will pick up again as the year progresses, adding that with the extensively revised ID.3 and the new ID.7, it continues to launch attractive new models.
That being said, the launch of VW’s performance ID.7 sedan which was originally supposed to be this month, has been postponed for later in the year.
VW is now seemingly a willing participant in the EV price war that Tesla started in the beginning of the year, after balking at the thought just a few months ago. Tesla has multiple production costs, software, and government subsidy advantages, though, so it remains to be seen how low can VW go with the price of its electric cars.
It already announced a mass market VW ID2.all concept that will cost half of what its EVs cost now and will go into production in 2025. Gas-powered cars are still £10,000 cheaper than EVs on average, however, so VW may have to speed up its battery factory and R&D plans to remain competitive in the EV era.
