Volkswagen cuts EV production as demand falters

In the first two weeks of October, Volkswagen will stop making two of its flagship EV models at a pair of its factories in Germany. The automaker is citing shrinking demand, fuelled by recent cuts to government subsidies. 

Production of VW’s ID.3 and Cupra’s Born will be put on hold at the carmaker’s main EV factory in Zwickau until October 16. Assembly of the ID.3 at a small-scale plant in Dresden will cease for the first two weeks of October, a spokesperson said.

Production of the ID4, ID5, Audi Q4 e-tron, and Audi Q4 Sportsback e-tron models will continue as usual.

Volkswagen has been having a tough time lately selling enough of its made-in-Germany electric cars, as rival brands like America’s Tesla and China’s BYD continue to dominate the market. Moreover, stunted economic growth as well as higher costs of living in Europe have slowed demand for its ID fleet of EVs.

Another factor has been the reduction of EV subsidies by the German government. At the start of this year, support for battery electric or fuel cell cars dropped from €6,000 to €3,000-€4,500 and will be cut further from January 2024. 

Subsidies for company EVs, however, were axed entirely from September 1, a major hit to VW’s Zwickau factory — some 70% of its EVs made there are destined to be company cars. 

Volkswagen did not comment on how workers at the two factories would be affected by the production freeze, but it did announce a few weeks back that it will let go of nearly 300 employees at the Zwickau plant.

Faced with rising costs in Europe, VW and other manufacturers like BMW and Tesla are increasingly building their cars in China and exporting them into the bloc.

Volkswagen now wants to have the new electric SUV Cupra Tavascan produced in a factory in China. That model, built on the same platform as the VW ID.4 and ID.5, should be launched in Europe next year.

However, it remains unclear for how much longer importing Chinese-made cars into European markets will remain profitable, after the EU said it’s launching an investigation into Chinese EV subsidies to ward off a flood of cheap imports.