Germany's largest automobile manufacturer Volkswagen announced plans to close factories and restructure its workforce, and just two days later, the German government decided to revive electric vehicle subsidies.
On the 4th (local time), the German federal government approved a tax reform plan at a cabinet meeting that provides tax credit benefits to companies purchasing electric vehicles.
The tax credit applies to vehicles purchased from July this year until December 2028. The government estimates that the tax savings will amount to 585 million euros (approximately 865.2 billion KRW) next year and 650 million euros (approximately 961.4 billion KRW) in 2028.
Last November, when the German Constitutional Court ruled the budget unconstitutional, making austerity measures inevitable, the government decided to abolish electric vehicle subsidies starting at the end of this year. Since then, demand for electric vehicles has plummeted. According to the German Federal Motor Transport Authority (KBA), newly registered electric vehicles this month totaled 27,024, a 68.8% decrease compared to August last year. During the same period, the overall decline in new vehicle registrations was 27.8%.
Industry insiders believe that the electric vehicle tax benefits will help Volkswagen, which is facing management difficulties. Earlier, on the 2nd, Volkswagen announced large-scale restructuring, including closing at least two factories in Germany due to worsening business conditions and terminating the 1994 employment stability agreement that promised no job cuts in Germany until 2029. This would be the first factory closure since Volkswagen's establishment. Volkswagen currently operates 10 factories in Germany. German media outlet Der Spiegel estimated that about 20,000 jobs could be lost if two Volkswagen factories close.
In addition to tax benefits, the government may intervene directly or indirectly in Volkswagen's process of factory closures and restructuring. Legally, Volkswagen cannot make significant decisions without the consent of the Lower Saxony state government, where its headquarters are located, and the labor representatives.
In 1960, the German government enacted the so-called "Volkswagen Law," raising the quorum for shareholder meetings to 80% of voting rights and limiting the voting rights shareholders can exercise to a maximum of 20%. Lower Saxony holds a 20.2% stake, enabling it to exercise veto power. Furthermore, factory relocations or new constructions require approval by two-thirds of the supervisory board, half of whose members are labor representatives. However, factory closures are not regulated under this law.
According to a German government spokesperson, Chancellor Olaf Scholz has held discussions on the Volkswagen issue with management, works council representatives, and supervisory board members. Robert Habeck, Minister for Economic Affairs and Climate Protection, urged Volkswagen to closely consult with its "social partners." Hubertus Heil, Minister of Labor, stated that factory closures and layoffs should be avoided.
The labor union has indicated it may strike to prevent factory closures and layoffs. Daniela Cavallo, chairperson of the works council, said at a press conference that day, "The workers have shown they are ready to walk this path with us." Thorsten Kr?ger, head of the Lower Saxony branch of the metalworkers' union IG Metall, described Volkswagen's decision as "an attack on all workers."
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