The CEO of the Volkswagen Group’s core VW brand has issued a warning about a lack of competitiveness as the brand looks to improve its return on sales and grow its market share for electric vehicles in China.
“With many of our pre-existing structures, processes and high costs, we are no longer competitive as the Volkswagen brand,” Thomas Schäfer, CEO of the VW brand, said at a staff meeting, according to information posted on an internal website and viewed by Reuters.
The comments come as VW is set to implement a plan to cut costs to the tune of 10 billion euros (approximately $10.9 billion). While this will include staff reductions, the reductions are expected to be made via agreements on partial or early retirement.
VW has previously said it plans to take advantage of its aging workforce to reduce staff numbers without firing people, and that it doesn’t intend to carry out any major dismissals, at least through the current decade.
Volkswagen plant in Wolfsburg, Germany
In an effort to curb costs, the automaker also announced in September that it has abandoned plans for a second plant at its headquarters in Wolfsburg, Germany. The automaker will instead rely on capacity at existing plants.
The brand enjoys the highest sales volumes within the VW Group, but its return on sales is the lowest. In an investor presentation earlier this year, VW said it wants to grow return on sales from 3.6% registered last year to 6.5% by 2026.
Its low market share for EVs in China has also been an issue. To speed up development of EVs for China, which is the world’s biggest market for both new vehicles and EVs, VW earlier this year partnered with Xpeng in a deal that will allow VW to gain access to the some of the Chinese automaker’s EV platforms. Fellow VW Group brand Audi forged a similar deal with China’s SAIC this year as well.
VW Group has also seen EV sales slow in its home market of Europe. When announcing its third-quarter results last month, the automaker said it now expects EV sales to make up between 8 and 10% of its total sales this year, down from an earlier target of 11%.
