Volkswagen CEO issues ‘final wake-up call’ amid drastic spending freeze
Warning of tough times ahead, CEO of Volkswagen Passenger Cars, Thomas Schäfer, addressed top VW employees this week, telling them, “This is the final wake-up call.” Schäfer is calling for a short-term spending freeze to get costs under control.
“We are letting the costs run too high in many years,” VW’s leader proclaimed during an online management meeting this week.
Schäfer said he plans to cut spending for the rest of the year as part of a broader company-wide savings plan. Last month, VW announced a new “Accelerate Forward” program designed to drive long-term profitability and performance.
Part of the plans includes doubling VW passenger brand profit margins from around 3% currently to 6.5%.
The core brands leader said after announcing the initiative, “The program is the number one priority for the entire Board of Management.” Through its Accelerate Forward strategy, VW expects to improve earnings by roughly $11.2B (10 billion euros).
The company will focus on higher volume models to streamline production while reducing the number of variants to further optimize efficiency. VW gave an example of its new ID.7 having 99% fewer configuration options compared to a Golf 7 model.
Meanwhile, Volkswagen’s problems go beyond just simply profit margins. Despite all-electric vehicle sales increasing 48% YOY to 321,600 in the first half of the year, EV sales fell in one of its most critical markets, China.
Volkswagen CEO: “This is the final wake up call”
According to quotes by Manager Magazin, VW’s Schäfer said at the management meeting this week:
The roof structure is on fire. This is the final wake-up call.
VW’s final wake-up call comes as the automaker’s dominance over the Chinese auto market is slipping. The Volkswagen Group generates around 40% of its revenue from China, yet EV sales are down 1.5% from the first half of 2022.
More importantly, while new EV registrations are still climbing in other key markets, many of these are older orders from last year or even 2021, in some instances.
According to Handelsblatt, the reason for VWs demand problem is its so-called agency model the automaker implemented with dealers while introducing its ID series.
The move essentially helps save on sales costs but limits the dealer’s ability to raise or lower prices. A VW sales rep said, “The manufacturer cannot sell directly, that becomes clear in times like these,” adding the electric models are “simply too expensive.”
The report claims VW’s high order backlog is still masking the low demand. Earlier this year, CEO of VW Group and Porsche, said he had no plans of joining Tesla in a price war.
However, unlike Tesla, Volkswagen is not generating substantial margins on its electric models. Despite this, the automaker has already caved in China by introducing a limited-time offer on its ID.3 electric car.
Looking ahead, Volkswagen will likely look to introduce cheaper, more basic models with smaller batteries, like the ID2 all concept starting under $27,000 (€25,000) with up to 279 miles (450 km) of range.
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Lucid Motors (LCID) will continue offering the $7,500 federal EV tax credit for Gravity buyers until the end of the year. Lucid’s interim CEO, Marc Winterhoff, said the electric SUV has “so many orders” and it doesn’t want buyers to lose out on the savings.
Are orders for Lucid’s Gravity SUV picking up?
Apparently, demand for Lucid’s new Gravity SUV is picking up. A recent Automotive News report claimed that Lucid registered just nine Gravity models in its first six months on the market, but the company was quick to shut down the rumors.
Lucid’s communication boss, Nick Twork, told Electrek in an email that the report was “completely inaccurate,” adding “a quick review of social media postings from our customers shows that those numbers are simply not credible.”
According to Twork, Gravity deliveries are “well into the 3-digit range.” In the second half of the year, Lucid expects the SUV to account for the majority of deliveries and production.
Winterhoff confirmed on Lucid’s second-quarter earnings call that production of the Gravity SUV was “beginning to ramp up” after resolving most of the supply chain issues that had limited output in the first half of the year.
Since it started offering test drives while adding Gravity models to its studios, Lucid’s interim CEO said the daily order rate for the electric SUV has nearly doubled.
During a new interview with Brew Markets on Tuesday, Winterhoff suggested that the Gravity is quickly attracting buyers. Lucid’s chief confirmed it will honor the $7,500 federal EV tax credit for Gravity buyers until the end of the year “because we have so many orders and we don’t want to tell order holders, you know what, you’re out of luck, we didn’t deliver in time.”
Winterhoff also said that Lucid expects a limited impact on sales from the loss of the credit due to its market position and pricing.
Lucid views the German luxury brands, including Mercedes, BMW, and Audi, as its primary competitors. Although it does view Tesla as a competitor, “we see ourselves a little bit of a notch higher than Tesla,” Winterhoff said, when comparing the interior, materials, and luxury.
Despite several luxury brands recently pulling back on their electrification plans, like Porsche, Lucid will remain a pure EV company and still believes electrification is the future.
Lucid’s vehicles currently start in the $70,000 to $80,000 range, but the company is working on launching its midsize platform in late 2026, which will bring the price down to around $50,000. The midsize platform will wear at least three “top hats,” including a crossover SUV, a more rugged variant, and a third, rumoured to be a midsize sedan aimed at the Tesla Model 3.
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The Trump administration is seeking to acquire a 10% stake in Nevada’s upcoming lithium mine, operated by Lithium Americas (LAC).
Lithium Americas (LAC) has a flagship lithium mining project, Thacker Pass, located in Nevada.
With the Biden administration, the company had secured a $2.26 billion government loan to advance the project to production. However, since taking office, Trump has been attempting to claw back many loans related to the energy transition.
Last night, reports began to circulate about the Trump administration attempting to renegotiate the terms of the loans to include a 10% stake in the project.
It sent LAC’s stock surging by as much as 80% in after-hours trading.
The reports forced the company to issue a comment. Lithium Americas confirmed being “in discussions” with both the Department of Energy, which issued the loan, and General Motors, which holds a 38% stake in the company and a right to buy the lithium from the mine, about drawing from the loan:
The Company is in discussions with the DOE and General Motors Holdings LLC (“GM”), its joint venture partner in the Thacker Pass lithium project (“Thacker Pass” or the “Project”), regarding first draw on the DOE Loan. The topics of these discussions include certain conditions precedent to draw on the DOE Loan and associated loan specifics, as well as incremental requests from the DOE for potential further conditions to first draw and/or potential amendments to the DOE Loan and associated transaction documents, including corresponding consideration. The Company continues to work with the DOE and GM regarding proposals for a mutually agreeable resolution.
This would be the latest example of the Trump administration taking direct stakes in companies and using “national security” as the reason.
Electrek’s Take
The Biden administration was attempting to establish a North American battery supply chain, but Trump has significantly hindered that effort over the last few months.
However, this is a good move.
The loan would have likely worked as well, but direct ownership is essentially how China operates, and it has worked out quite well for them. There’s a word for this, but Trump’s base hates it.
My main issue with how Trump is doing these market-moving announcements and leaks looks a hell of a lot like insider trading.
Even with this move on LAC, there was suspicious short-term option trading on the stock leading up to this.
The US is in its era of grifters.
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