Zwickau, a city in eastern Germany, may not be as famous as Detroit, but its economy has revolved around internal combustion engines since August Horch established Audi there in the early 20th century.
So when Volkswagen announced in 2018 that it would convert its Zwickau factory, the region’s largest private employer, to make only electric vehicles, it was a big deal.
“A lot of people were skeptical,” said Michael Fuchs, who has worked at the plant for more than a quarter century. They were wondering, “What’s going to happen?” he said.
Volkswagen has closed the assembly lines producing its popular Golf sedans and converted the plant, which has its own highway exit, to make six electric models. The renovated factory can produce one car per minute and ship it by train.
This is a rare case where a major auto plant has completely switched from internal combustion to battery power, making Zwickau a case study for a big question facing the auto industry.
Electric vehicles have far fewer parts than gasoline cars: no radiators, exhaust pipes, fuel tanks, fan belts or complicated gearboxes. As a result, many auto workers, executives, and politicians speculated that such cars would require fewer workers, leading to massive unemployment in industrial cities around the world.
Zwickau, where more than 10,000 people work for Volkswagen and tens of thousands more for suppliers, appears to have avoided these dire consequences. Employment did not fall and suppliers of parts for combustion vehicles were not forced into mass bankruptcy. His experience offers lessons of hope for other countries that rely on the auto industry.
Yet residents of Zwickau, with its pristine but sleepy city center, are still worried.
Although Zwickau’s experience suggests that the conversion to electric vehicles will not in itself lead to economic misery, this and other new technologies are shaking up the industry in ways that could still be very painful for businesses established and their workers.
A major change already visible in Germany and the rest of Europe is the rapid growth of young Chinese electric car makers like BYD and SAIC, which are increasingly taking customers away from established rivals like Volkswagen, the world’s second-largest automaker. after Toyota.
“The question is: to what extent will mobility change overall? said Thomas Knabel, who heads the Zwickau local of IG Metall, the union that represents Volkswagen workers. “Will Volkswagen still be here in the future?
Europe’s best-selling electric car is Tesla’s Model Y sports utility vehicle, built at a factory about 230 km north of Zwickau, near Berlin. Last year, Volkswagen sold less than half of its equivalent SUV, the ID.4, according to Schmidt Automotive Research.
Disappointing sales prompted Volkswagen to cut a shift at one of its two assembly lines in Zwickau, where the company makes the ID.4, ID.5, two Audi models and two small electric cars. This decision illustrates the downsides of going all-in on electric vehicles. Other established automakers have hedged their bets, producing electric vehicles and gasoline-powered cars in the same factories, allowing them to adapt to fluctuations in sales.
“This is a much more ambitious project than anything I know of in North America,” said Ian Greer, a research professor at Cornell University who has studied the region around Zwickau. “VW took a much bigger risk.”
With the factory operating below capacity, some Zwickau residents question whether Volkswagen’s electric vehicles are attractive enough.
Max Jankowsky, president of the regional Chamber of Commerce, said he was disappointed not to see any Volkswagens during a recent trip to Dubai. “It was just Tesla, Tesla, Tesla,” said Mr. Jankowsky, who is also president of a company that makes cast iron parts for suppliers to Volkswagen and other manufacturers.
Volkswagen executives say they expect sales to pick up this year as the group begins selling new models, including a station wagon and a pickup truck, targeting market segments where Tesla does not operate.
“We are aware of our current challenges and we are addressing them rigorously,” Oliver Blume, Volkswagen’s chief executive, said in a statement last month.
In the short term, at least, the consequences for the local economy of the Zwickau factory’s conversion have been surprisingly mild, say local authorities, business leaders and worker representatives.
Increased demand for workers to make electronic components has more than offset job losses in production lines for combustion car parts, according to a study by AMZ Saxony, a supplier group.
“Overall,” said Dirk Vogel, managing director of AMZ, “not much happened.”
Volkswagen, local businesses and authorities coordinated an effort to prepare workers and businesses, mitigating the impact.
The car manufacturer has expanded its training institute in Zwickau to train its employees in electric vehicle technology. To generate enthusiasm, Volkswagen allowed workers to borrow battery-powered cars for a few days. The West Saxon University of Applied Sciences in Zwickau, a state college that already had a strong focus on the automotive industry, has expanded courses related to electric vehicle technology.
Suppliers have developed new components for electric vehicles to replace products at risk of becoming obsolete. Eberspächer, a German supplier that has a factory 100 kilometers east of Zwickau, near Dresden, has started offering temperature control systems for electric vehicles in addition to emissions systems for conventional cars.
Some suppliers suffered. GKN Driveline, which makes unnecessary driveshafts in most electric cars, is closing a factory in Zwickau and moving production to Hungary. But GKN did not supply Volkswagen, and the closure appears to be a reaction to broader industry trends and German labor costs. GKN did not respond to requests for comment.
New technologies have also created jobs, including 175 at FDTech, based in nearby Chemnitz. The company, partly owned by Volkswagen, is one of five companies in the region developing autonomous driving technology.
Zwickau benefits from a unique opportunity. Many local suppliers make seats, dashboards, paint equipment or other products that electric vehicles need as much as gasoline cars.
Due to a shortage of electricians, engineers and other skilled workers, the unemployment rate in the state of Saxony, which includes Zwickau, has increased only modestly. It was 6.6 percent in March amid a general economic slowdown, compared to 6.3 percent a year earlier.
“There will be suppliers that disappear,” said Karsten Schulze, managing director of FDTech. “But qualified workers will immediately be sought elsewhere.”
Volkswagen workers had some control because German law requires them to be consulted on changes affecting working conditions. The IG Metall union has convinced the company not to lay off any full-time employees in Zwickau until 2030 at the earliest. However, this guarantee does not apply to temporary workers and the company fires 270 of them after the expiration of their contract.
In the United States, unions are relatively strong in the Midwest and East, but most auto plants in the South are not unionized. The United Auto Workers are trying to change that. But even if the union succeeds, American companies will have no obligation to consult workers on changes that will affect their jobs, nor to retrain them for new jobs. And there’s no guarantee that new jobs in battery manufacturing, for example, will pay as well as jobs in car assembly plants.
Residents are proud to note that Zwickau has survived numerous uprisings. After Germany’s defeat in World War II, Soviet occupiers confiscated Audi’s manufacturing equipment. The car manufacturer moved to Bavaria and was later bought by Volkswagen.
The communist government that ruled East Germany converted the Zwickau factory to produce no-frills Trabant vehicles. The cars spewed blue exhaust and had plastic bodies due to the shortage of steel. After the reunification of Germany in 1991, they could not compete with Western cars. Thousands of Trabant workers lost their jobs. By the late 1990s, unemployment in the region exceeded 20 percent.
Volkswagen acquired the Zwickau plant after reunification and gradually expanded it into one of the company’s largest production sites. The conversion to electric cars was significant enough that then-German Chancellor Angela Merkel attended a ribbon-cutting ceremony in 2019, when the first battery-powered model rolled off the assembly line.
Not everyone in Zwickau is a fan of electric cars. The far-right Alternative for Germany party, which holds 11 of the 48 seats in Zwickau city council, has complained about Germans being forced to buy electric vehicles, echoing comments from former President Donald J. Trump and other Republicans.
The national government, led by Chancellor Olaf Scholz, a social democrat, angered many in Zwickau when it abruptly cut subsidies for electric vehicles last year to deal with a budget crisis. Sales of electric vehicles in Germany fell 14 percent in the first three months of the year, although they still accounted for 12 percent of new cars.
Yet few people in Zwickau are pushing for Volkswagen to return to building gasoline cars.
“When transitioning to new technology, the question is always: are you first or last? said Constance Arndt, Mayor of Zwickau. “I think it’s always best to be first.”
