Volkswagen’s supervisory board will meet on Friday to vote on sweeping changes that would see the world’s biggest carmaker accelerate plans to expand its production of electric vehicles.
Two people familiar with the plans confirmed that management was seeking to revamp two German plants, in Emden and Hannover, so that they can produce electric cars in the early 2020s, as first reported by Handelsblatt.
The board’s vote is more than a rubber stamp approval, as VW’s powerful labour unions — which make up half the board — are squabbling over details that include proposals to shift some production from Germany to the Czech Republic.
The plans, which may also include new targets for profit margins, are an opportunity for Herbert Diess, chief executive since April, to make his mark on the group.
VW produces the Passat and Arteon models at Emden, which is home to more than 8,000 employees. Some of those jobs are at risk because sales of the Passat are declining. One person described the market in Turkey — an important destination for the saloon model — as being “in freefall,” with September sales down 68 per cent from a year earlier.
To safeguard the manufacturing sites in Emden and Hannover, VW management argues it makes sense to shift complex, combustion engine cars that require many work hours to the Czech Republic, where labour costs are cheaper, two people said.
The two German plants could then be future-proofed by converting them to produce electric vehicles, whose global sales are set to boom. However, these could require fewer workers because, according to Goldman Sachs, an electric car needs only two-thirds the parts of a conventional car.
Management is aware that a shift to electric cars will result in shrinking its workforce, one person said, but it wants to cut headcount in a responsible way so that tens of thousands of ageing workers can retire rather than be made redundant.
One proposal is to make Emden the site for an entry-level, sub-€20,000 car in Volkswagen’s ID range. The car has not been fully designed yet but would be comparable to a VW Polo. “The objective is to bring EVs that are comparable to what people already know today,” one person said.
The Hanover site, which produces light commercial vehicles, may be revamped so it is able to produce both combustion engine and electric cars, including the ID Buzz — a minibus reminiscent of the iconic VW camper van.
Emden and Hannover are also favoured over sites in eastern Europe because of Germany’s longstanding domestic commitment to cut fossil fuel use.
The two sites would follow in the footsteps of VW’s plant in Zwickau, Saxony, which is being transformed to begin building the first ID model for sale late next year.
The three people said Volkswagen believes it must accelerate its electrification plans given the ambition of EU regulators to cut carbon emissions 40 per cent by 2030.
VW has earmarked €20bn to produce 50 pure-electric models and 30 plug-in hybrid models by 2025. Another €50bn is being directed towards procuring batteries. Its plan is to be selling 2m-3m battery electric vehicles a year by 2025.
NEWS SOURCE: FINANCIAL TIMES