Volkswagen parks EV production following downturn in demand

Volkswagen has been forced to kerb its electric vehicle production in Europe following a downturn in demand for zero-emission vehicles.

Reports out of Europe claim EV manufacturing operations at VW’s Emden plant will be halted for at least six weeks in response to the reduced demand, resulting in the axing of 300 temporary positions.

The German car-maker says current demand for EVs in Europe is down 30 per cent on its internal forecasts. carsales’ own recent EV intender survey showed a 12 per drop in the number of Australian consumers considering an EV.

Other consequences of Volkswagen’s EV slow-down reportedly include the rescheduling of the VW ID.7’s production start from July to the closing stages of this year.

In a statement issued to The Times, a Volkswagen spokesperson attributed softening EV demand to “reduced subsidies, higher inflation and recent longer delivery times due to the shortage of parts”, but said the brand was confident demand would return “as the year progresses”.

Another major concern for Europeans remains range anxiety due to the overwhelming shortage of public EV charging points, with recent data showing EVs outnumber charging stations by 85 to one.

“I used to say ‘No-one who has driven an EV goes back to petrol/diesel as the driving experience is fantastic’,” Society of Motor Manufacturers and Traders CEO Mike Hawes told The Times.

“Now I’m beginning to hear people saying ‘I just can’t live with the anxiety around where I am going to charge’.”

It remains to be seen exactly what – if any – impact these production halts could have on Australia, which has long been a low-priority market for Volkswagen in terms of global EV uptake, and where price remains the biggest hurdle for Aussies considering an EV as their next vehicle purchase, according to carsales’ own research.

Volkswagen shares fell by two per cent last Tuesday, when news of the production cut first broke, before recovering by one per cent the following day and VW spokesperson Christopher Hauss told Reuters the company “expects the trend in BEV orders, which already improved in May, to gradually stabilise in the coming months”.

However, some analysts said VW’s production cut indicates the European EV market is not growing fast enough to support the company’s growing EV range, which competes with an increasing number of Chinese EVs and Teslas made in Germany and China.

“Reducing the number of temporary staff and cancelling a shift signals that VW is not expecting this to improve in the short term,” Stifel analyst Daniel Schwarz told Reuters.

Morgan Stanley said it expects a slowdown in European demand for EVs after cuts to subsidies and that other car-makers will slow or defer their EV plans by many quarters or even years, as a growing number of European nations push back on EU7 emissions regulations due in 2026, before the sale of new combustion vehicles is effectively banned in the EU by 2035.

Volkswagen Australia’s first dedicated EV, the Volkswagen ID.4 electric SUV, is on track to launch Down Under – where a mandatory fuel-efficiency standard for all new cars is expected to be announced later this year – in the first half of next year, followed by the ID.5 ‘coupe’ version, the ID.3 hatch and the ID. Buzz van and people-mover by the end of 2025.

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