"Can Volkswagen reinvent itself for the electric era?"
"Can Volkswagen reinvent itself for the electric era?", a great film by Financial Times
VW is the biggest industrial company in Europe by revenue. It employs ~300K workers in Germany and contributes an estimated 8% of German GDP. It represents the industrial success "produce in Germany and export to the world".
However, it has encountered strong headwinds:
-Higher energy costs due to the war since March 2022
-Losing market share in China to local competitors
-Facing EV transition pressure in Europe (end of sales of combustion engine-based cars in 2035)
-Struggling to gain market share in the US
-Facing tariffs imposed by the Trump administration
The China and EV angles are worth unpacking.
VW helped form the Chinese auto industry and has been the market leader for decades. But the critical moment happened in 2021, when Tesla opened its megafactory in Shanghai. If Apple trained China in electronics engineering, then Tesla showed Chinese consumers what a great EV looks like. Also, like Apple, Tesla trained its downstream suppliers on its world-class production process. On top, there is Chinese government has poured billions of subsidies into the industry.
EVs are fundamentally different from cars with combustion engines. It's a computer on wheels. It's about software and user experience. The Chinese EV makers that don't have a combustion engine legacy got this. BYD, Huawei, and Xiaomi are tech companies. Particularly, Huawei and Xiaomi also produce smartphones, which connect seamlessly with their EVs. VW is losing its market share in China because its EVs are not competitive.
It's always easy to analyse but hard to make good decisions, as each decision requires hard trade-offs. Fundamentally, VW needs to produce great EVs at a competitive price point while facing all the headwinds.
I appreciate that FT also took a strong angle on the social point. The transition back to winning will be painful, but finding a way to provide great cars that customers want is essential for the company's existence, and more broadly, for Germany or even the European economy.