First it was the Covid-19 pandemic, then the semiconductor shortage, and then the Ukraine War. The automobile industry is facing one of the most complicated contexts in living memory and Volkswagen is experiencing it on its own skin. So much so that they are already considering moving a large part of their production from half of Europe.
Hard times. These are not easy times for manufacturers or consumers. On September 20, Ford’s stock price plummeted as it had not been seen in more than a decade. The reason: Inflation will cost you an extra $1 billion per quarter and your income will be seriously reduced. General Motors has also suffered a severe decline and is even manufacturing its own chips for its autonomous vehicles, as a result of the general shortage.
For consumers, the situation that is being experienced is not easy either. There are those who pay more for a Tesla of kilometer 0 than for a new one in order to skip the queue. In the United States, there are cars that are worth buying for the simple fact of reselling them. And in Spain we are seeing how manufacturers have to sell models with closed equipment to limit waiting times.
The many faces of war. The Russian invasion of the Ukraine has been the last straw in a market that was already very pressured. One of the first decisions was the exit of the brands from the Russian market. Renault, BMW, Stellantis and Hyundai have been some of the manufacturers most affected by this change of course.
But the entire industry has been affected. In fact, Ukraine was one of the largest manufacturers of wiring harnesses for vehicles. By saving five euros on a part, the production of thousands of cars was delayed. Volkswagen was one of the most affected companies.
skyrocketing prices. With the problems that have been occurring, manufacturers have been forced to increase the prices of vehicles and pass on part of their increased expenses to consumers. A decision that, however, continues to bring high profits to manufacturers despite selling less. Safety requirements by the European Union are also increasing the cost of cars.
Nor does the conversion to the electric vehicle seem to be the way to improve the prospects. Although the production of their engines is simpler and they require fewer employees (the brands are already warning of massive layoffs), the price of raw materials has skyrocketed to the point that cars, such as the Ford Mustang Mach E, have stopped to be profitable.
the lace. And in this context, the war in Ukraine has once again put a new stone on the road. Now, the gas cut and high electricity prices, which are complicating the profitability of some factories in Germany and Eastern Europe. So much so that VW is considering moving its production.
According to Bloomberg, the company would be thinking of moving a large part of its manufacturing to southwestern Europe and the north of the continent, where the gas supply seems to be more guaranteed to have the door open to the entry of ships that transport LNG.
Indirectly benefited. Volkswagen’s move would be a serious blow to its factories in Germany, the Czech Republic and Slovakia, from whose factories strategic vehicles for the entire group come out, such as the Volkswagen ID.3, the Skoda Kamiq, Karog and Eniaq iV or the large SUVs that come out from the gates of Bratislava, such as the Volkswagen Touareg, Audi Q7 and Q8 or Porsche Cayenne.
In the economic newspaper they point to statements by Geng Wu, Volkswagen’s purchasing manager, in which he points out that the manufacturer is working on “medium-term alternatives. We are focusing on greater localization, relocation of manufacturing capacity or technical alternatives similar to what is already common practice in the context of challenges related to semiconductor shortages and other recent supply chain disruptions.”
But, in addition, an internal source would have pointed to Spain, Portugal or Belgium as some of the possible destinations for part of the production of these cars. In our country, Volkswagen has plants in Martorell, El Prat de Llobregat, a factory called into question by the company itself, and Pamplona, in addition to building a battery gigafactory in Sagunto.
exit to the sea. One of the reasons given for the better position of Belgium and the Iberian Peninsula is their access to the sea and less dependence on Russian gas. As El País pointed out, gas reserves in our country are much lower than in Germany, Slovakia or the Czech Republic, but this is not definitive since LNG imports by ship have doubled (they are already 50% higher than in the same period of a year ago).
In addition, the regasification plants will have a much more important role in the new context. Europe has 24 available but six of them are in the Iberian Peninsula. Slovakia and the Czech Republic (landlocked) do not have any and Germany does not have any available at the moment.
George is Digismak’s reported cum editor with 13 years of experience in Journalism