(April 30): Volkswagen AG is open to sharing unused capacity at its European plants with Chinese manufacturers, as the region’s biggest automaker steps up a savings push to stay competitive.
Co-producing at factories would be a “clever solution” to reduce capacity and lower costs, VW chief executive officer Oliver Blume said Thursday on a call with reporters. The carmaker, which has already shrunk capacity by one million vehicles, is slimming down headcount in Germany, where workers hold powerful sway over company decisions.
“We expect tougher competition in the next years, especially from the Chinese car manufacturers, but we see ourselves very well prepared,” Blume said.
The potential steps mark an escalation for the industry’s fight to stay competitive in Europe, where shuttering plants and shrinking workforces are a laborious and costly task. Stellantis NV, second to VW in Europe, is holding talks with a range of Chinese companies including Dongfeng Motor Group Co to share sites in the region, Bloomberg has reported.
Chinese carmaker sales are surging in Europe, with the likes of BYD Co and SAIC’s MG leading the charge. The new competitors are now intensifying efforts to establish manufacturing sites in Europe, after the European Union put in place import tariffs on China-made EVs and is working on new restrictions to encourage local production.
VW on Thursday also said its studying option to bring vehicles made with Chinese partners — which include SAIC, FAW, Horizon Robotics and Xpeng Inc — to Europe.
See also: MINI 1965 Victory Edition launched in Singapore
Earlier Thursday, VW reported a decline in first-quarter operating margin as tariffs and increasing competition in key markets weighed, prompting the need for more savings. Group operating returns fell to 3.3% in the first three months of the year, down from 3.7%.
VW shares turned slightly positive at 10.42am in Frankfurt trading after an earlier decline of as much as 3.3%.
VW’s plans to further downsize come as sales fall in the US and China with the carmaker seeing little chance of a quick bounce-back. On Thursday, VW also reiterated plans to reduce complexity across vehicle platforms and model variants to boost savings.
See also: Where's the Dorifto?
The company made progress on efficiencies during the first quarter, citing a €1 billion (US$1.2 billion or $1.49 billion) reduction in overhead costs and net cash flow of €2 billion.
Porsche and Audi — Volkswagen’s two traditional profit drivers — are struggling after their strategies on electric models didn’t work out as expected. After years of development snags and delays of key models, both nameplates are trying to regain momentum to keep pace with the likes of Xiaomi Corp, Nio Inc and BMW AG on next-generation software. Tariffs in the US are further undermining profits.
At Audi, operating profit and margin improved after more efforts to bring down costs. Provisions on keeping pace with regulation on lowering fleet carbon dioxide also fell, and the unit incurred lower restructuring charges, Volkswagen said. The brand will provide more details on its results on May 5.
Thursday’s result includes an approximately €500 million charge for ending production of VW’s lone US-made EV, the ID.4 sport utility vehicle.
Uploaded by Chng Shear Lane
