Business as usual at VWA amid rumours of German plant closures

Volkswagen Group Africa (VWA) says its Kariega assembly plant, in the Eastern Cape, is operating as usual amid possible plant closures and job cuts at its parent company in Germany.

In fact, the local company says it expects exceptional production volumes this year.

The Kariega plant assembles the Polo Vivo for the domestic market and the Polo for the local and export markets. Both are internal combustion engine models.

Volkswagen warned early last month that it would weigh closing factories in Germany for the first time in its 87-year history as it faces profitability challenges amid rising pressure from Asian competitors.

“Fewer cars are being sold in Europe and new competitors from Asia are pushing aggressively into the market,” Volkswagen CEO Oliver Blume told the Bild am Sonntag newspaper. “The cake has got smaller and we have more guests at the table.”

The carmaker said in a statement that the measures were meant to bolster the Volkswagen brand, in particular.

The New York Times reports that IG Metall, the union that represents German automotive workers, responded by saying that it would resist any job cuts.

It added that Volkswagen managers had told it that a cost-cutting plan announced last year was not working and that additional savings worth billions were needed.

The upheaval at Volkswagen follows an announcement by the EU in June that it would impose additional tariffs of up to 38% on electric vehicles (EVs) imported from China, in what the bloc’s leaders said was an effort to protect the region’s manufacturers from unfair competition.

The move came a month after President Joe Biden said the US would quadruple US tariffs on Chinese EVs to 100%.

The New York Times notes that the actions by the EU and the US reflect the challenges that traditional automakers in Europe and the US face from up-and-coming Chinese companies, founded with a focus on electric vehicles, with many of them operating at lower cost bases than their rivals in the West.

The challenge, however, is that several EU carmakers are deeply entrenched in the Chinese market, with their cars produced in the Asian country also subject to the higher tariffs.

The New York Times says these auto manufacturers have criticised the EU’s move to increase duties from the current 10%, fearing retaliation from China, as well as an increase in prices across the market and a drop in demand for battery-powered cars.

According to a market investigation by the EU, the Chinese electric car supply chain receives government subsidies that allow manufacturers to reduce their production costs. This gives Chinese producers an unfair edge over their European rivals, according to the European investigation.

Reuters reports that the EU imported around 440 000 EVs from China in the 12 months ending in April.

Definitive EU import duties would only be confirmed towards the end of the year, and typically apply for five years.

Some Chinese companies are expected to increasingly invest in European production, thereby avoiding the additional tariffs.