Volkswagen has too much production capacity. Can China be a solution?

O Volkswagen Group, like other western car manufacturers, deals with the excess production capacity – the potential closure of factories in Germany under the restructuring plan to face the biggest crisis in its history is up to the table.

Other builders are betting in cooperation agreements with chinese competitors, opening the doors of their industrial facilities to make the installed capacity profitable. These are Stellantis' cases with Dongfeng and Leapmotor or Ford and Geely.

At the conference to present results to investors, transcribed by Yahoo Finance, financial director Arno Antlitz was asked about the possibility of licensing to Chinese manufacturers in Europe or even bring it to the Old Continent models designed for China.

In the answer, it first recalled that there was a strong fall in sales on the European market overall with the pandemic, while the Chinese are expanding considerably and exports outside Europe are decreasing.

They are factors that, according to Arno Antlitz, left the Volkswagen Group with a excess production capacity of 500,000 cars: “We cannot guarantee the operation of these four German factories“. And there are several possible solutions.

The financial director began by pointing out one of them: “It could be analyzing the cars we don't have in Europe. For example, big SUVs for Volkswagen as Touareg successors. This could represent an opportunity for a factory in Europe, but only if the model is Volkswagen”.

Bringing Chinese models to Europe has potential risks to the local range: “In addition, we must consider that if we invest in a Chinese car to be produced in a German factory and is equivalent, for example, to a compact SUV like Tiguan, we would have filled a whole factory with a Tiguan produced in China. This, however, would reduce the sales volume of our current Tiguan by pressing production in Wolfsburg. So we have to assess whether this is really a viable opportunity.”.

Arno Antlitz explained that this analysis must consider whether they would be vehicles of new segments or if they would attract new customers or buyers who would replace other models.

Open factories to Chinese?

Out of the question seems to be the sharing of factories with competition – at least in the position of this leader of the German conglomerate: “I would not advise, say, to build competitors in our own factories. They'll absorb us, take the sales volume that's meant for us and we'll strengthen them“.