Tesla’s new Berlin factory is making Volkswagen’s CEO nervous

Volkswagen is ramping up its EV transition.
Volkswagen is ramping up its EV transition.
Image: Reuters/Matthias Rietsche
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Volkswagen’s Wolfsburg, Germany plant has withstood decades of change. The automakers’ headquarters were originally commissioned by Adolf Hitler and converted into a Nazi armaments factory before being liberated by US troops in 1945. The plant went on to embody the transformation of the automotive industry, producing more than 46 million vehicles over the years, including VW’s famous Beetle car.

But Wolfsburg’s future is now under threat because a new manufacturer is coming to town: The US electric vehicle company Tesla plans to open a factory in Berlin next year, and CEO Herbert Diess has voiced concerns that VW won’t be able to keep up with the competition.

The German car manufacturer has long had plans to invest in EV production, but it’s ramped up these efforts in recent months as Tesla makes headway on its own plant, which is located 120 miles away from Wolfsburg. The planned EV transition, coupled with ongoing supply chain issues, have pitted Diess against VW workers, who are worried layoffs are coming. Diess canceled a trip to the US to attend a labor-organized event addressing these concerns today (Nov. 4).

“Yes, I’m worried about Wolfsburg,” Diess said before staff members during a meeting at the plant, which employs more than 60,000 people. “I want that your children and grandchildren can still have a secure job here with us in Wolfsburg. That’s my point today, that’s why I’m here.”

Volkswagen’s planned transition to EVs

While Tesla’s market dominance currently seems to be top of mind for VW executives, the company has been angling to transition to EVs for a number of years, says Michelle Krebs, an executive analyst with Cox Automotive. In 2019—a year after VW executives were ousted for installing emissions-manipulating software in the brand’s diesel cars—the company set a target to be carbon neutral within the next 30 years. In March  the carmaker said it planned to open six battery factories across Europe, as well as install a network of 18,000 charging stations in the hopes of making EVs the most cost-effective option for drivers. The company has said it expects half of its sales to come from battery-electric vehicles by 2030.

But Tesla’s German arrival seems to have intensified these efforts. On Oct. 28 the company said it needed an additional month to think about its forthcoming five-year investment plan in light of “increased competitive pressures,” which underscored the necessity to present a “joint vision” for 2030. The company now plans to submit its plan on Dec. 9.

Diess pointed out in the staff meeting that Tesla plans to employ 7,000 workers at its Berlin plant, and estimates it will take just 10 hours to produce each car. At VW’s electric car factory in Zwickau—which employed nearly 9,000 people as of last December—it typically takes workers 30 hours to assemble a car, and the CEO said he wanted to cut down production time to 20 hours next year. VW already plans to manufacture an electric vehicle at the Wolfsburg plant, and on Thursday Diess told workers the company is considering introducing a second EV model to their production.

Workers voice concerns about job losses, supply chain issues

Talk of a more rapid transition to EVs has spurred anxiety about job losses. “The unions in Germany are very strong, and they’re concerned about the threat of losing jobs because it does not take as many workers to assemble EVs as it does internal combustion engines,” Krebs says. “There’s also the issue of cutting costs,” she adds, noting research that goes into developing EVs is a “huge investment.”

Daniela Cavallo, the head of the union representing VW workers, addressed talk of possible job losses in light of the EV transition today, telling Diess, “There is not one person too many on board here.” Cavallo, who sits on VW’s management board, said she wasn’t willing to accept any job cuts as part of the company’s expected overhaul.

The representative for VW workers urged Diess not only to consider employees’ worries about job cuts, but also the supply chain crisis that has hurt VW’s manufacturing output. VW vehicle production dropped by 27% this year, representing the worst manufacturing year on record for the Wolfsburg since the 1950s.