By DCB Editorial, January 28, 2025
We often say here at DCB that Germany is the EU and the EU is Germany—it functions like a supermassive black hole at the centre of the Milky Way, exerting a powerful economic and industrial gravitational pull to which EU member states are bound. However, this magnetic force can erode quickly. When Germany lost access to cheap natural gas imports from Russia—a topic for another debate—its economy spiraled into decline. Manufacturing in Germany became prohibitively expensive, causing industrial production costs to soar. As a result, manufacturers across all sectors are now struggling to compete internationally.
German car manufacturers have been particularly hard hit, with Volkswagen (VW) beginning to shift production to Mexico in response. VW Group sales across all brands have declined, creating fissures that are forcing senior management to reconsider the company’s production and manufacturing strategy in Germany.
Volkswagen (VW) is considering alternative uses for its Dresden and Osnabrueck factories as part of a cost-cutting initiative aimed at downsizing its German operations. The automaker, which partners with Chinese companies SAIC, FAW, and JAC, as well as owning a stake in EV startup Xpeng, has discussed the possibility of these partners investing in German plants. This follows reports of Chinese investors expressing interest in acquiring German factories.
A recent agreement between VW and labor representatives will see production end at the Dresden plant, which builds the electric ID.3, by 2025 and fully cease operations by 2027. The Osnabrueck plant, with 2,300 workers producing the T-Roc Cabriolet, may be sold to a Chinese buyer. Selling factories could save VW more than outright closures, with each plant potentially fetching between €100 million to €300 million.
Building cars in Germany would allow Chinese EV manufacturers to bypass EU tariffs on imported vehicles, posing a competitive challenge to European automakers. Given VW’s status as a symbol of German industrial strength, potential Chinese investment in these plants may become a politically sensitive issue amid Germany’s ongoing economic challenges and the global shift toward green technologies.
