The German car manufacturer Volkswagen will cease vehicle production at its Dresden plant this Tuesday. This is the first time that the company, in its 88-year history, has interrupted production in Germany, reports the Financial Times.
The company has reviewed its investment plans and the budget for the next five years is approximately 160 billion euros (187 billion dollars), a sum significantly lower than the plan for the 2023-2027 period of 180 billion euros (211 billion dollars). Likewise, the consortium is forced to adjust its budget, as it continues to invest in the development of internal combustion engines, since it is estimated that their useful life in the market will be longer than expected.
The Dresden plant has manufactured less than 200,000 automobiles since its opening in 2002, representing less than half of the annual production of Volkswagen’s main factory in Wolfsburg.
Its facilities were designed to showcase the technical skill of the consortium and began by focusing on the assembly of the luxury model VW Phaeton, but after this vehicle ceased production in 2016, it was transformed into an emblem of the company’s efforts towards electrification, ultimately being responsible for the manufacture of the electric car ID.3.
The closure of the plant represents a step towards reducing Volkswagen’s production capacity in Germany, which is part of an agreement negotiated with the unions last year, which also involves the elimination of 35,000 jobs in the firm throughout the country. Meanwhile, the head of the company, Thomas Schäfer, previously assured that the decision to close production had not been taken “lightly”, as “from an economic perspective it was essential”.
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Challenges for the German automotive industry
The media recalls that the measure comes in a context where the main car manufacturer in Europe faces financial difficulties due to low sales in China and the decrease in demand in Europe, in addition to the tariffs imposed by the Donald Trump Administration that affect its sales in the US market.
Faced with this, the country’s automotive sector is going through a period of instability. Among the most affected companies are the giants Mercedes-Benz, Volkswagen and its subsidiary Porsche. In fact, Moritz Schularick, economist and president of the Kiel Institute for the World Economy, predicted that the three main manufacturers —Volkswagen, BMW and Mercedes-Benz— will probably “not continue to exist in their current form within five years”.
