The world’s largest automaker by sales is on the verge of yet another crisis. Earlier this year, Volkswagen’s CEO Oliver Blume, who replaced its previous CEO nearly a year ago, said in an internal meeting that the “roof is on fire” and that their “structures and processes are still too complex, slow, and inflexible.” VW’s CFO added, “Our business is unwell.”

Is it terminal?VWAGY

is down 24% in the past five years, and its market value is less than one-tenth of Tesla’s despite having three times the revenue. Electric vehicles (EVs) hadn’t been a priority for Volkswagen until their 2015 emissions scandal exposed their false “clean diesel” claims and cost them ~$35B.

• Once China’s leading automaker, VW is now losing market share in China — which accounted for nearly 40% of its global deliveries in 2022 per BBG — falling from 20% in 2019 to 10% in 2023.
• It’s also lagging behind Tesla and Chinese brands like BYD and Nio — which have begun encroaching on Volkswagen’s home turf, Europe.

Last week, VW scrapped its $2.1B plan for a dedicated EV factory in Germany, and Reuters reported that VW temporarily stopped making the ID.3 and Cupra Born EVs due to lower demand. And as a result of European EV subsidies ending, Volkswagen has begun moving manufacturing to China just to ship back to Europe.

Never back down, never what? Never give up.

Volkswagen is at an inflection point — at risk of sinking alongside the shrinking combustion vehicle market and the weight of its oversized corporate structure. While the company is still churning out massive profits — its net income margins are a third of Tesla’s, whose total profits in 2022 ($13.5B) nearly surpassed Volkswagen’s $15.4B.

• Earlier this year, Volkswagen announced a $193B investment over five years — with 68% of it going into developing new EVs and software.
• They recently purchased a 5% stake in Chinese carmaker Xpeng (NYSE:XPENG) to co-develop EVs.

And to shore up its cash reserves, Volkswagen spun off Porsche last year, netting it 19.2B euros. Volkswagen is making progress in the EV transition, with ~6.9% of their total vehicles sold being EVs in 2022, up from 5.1% in 2021 — but if it doesn’t pick up the pace, the “people’s car” risks turning into nobody’s car.