Why VW Is Killing Its EV Factory Plans

• Volkswagen shelves plans for a new factory in Wolfsburg, once planned to produce Project Trinity, while dialing down production amid decreasing demand for some models.

• The EV maker has mentioned waning demand for EVs this year, after a surge in demand in 2020 and 2021 left automakers rushing to fill orders.

• The automaker is readying the next-gen SSP platform that will underpin an electric version of the Golf, while Project Trinity will be produced in Zwickau.

Early on the pandemic VW struggled to keep up with demand for its EVs, with waiting lists stretching months. The automaker's limited lineup, which had just entered production, couldn't keep up with a sudden surge in buyers, just as the chip crisis and other supply-chain issues hit the global car industry.

Still, VW was able to launch production of several new electric models in Germany, China, and the US, while advancing plans to open a new EV plant near its historic home in Wolfsburg.

Now the automaker has shelved those plans, favoring the existing plants in Wolfsburg and Zwickau. The plant was originally slated to produce Project Trinity, Volkswagen's electric flagship.

"During the plant allocation planning, it was decided that there was no need to build an additional plant in Wolfsburg Warmenau," the automaker said in a statement. "Instead, new electric models based on the SSP architecture (scalable systems platform), that will be introduced at the end of the decade, will be integrated into existing and modernized structures at the main plant."

Among models that will be produced on the SSP platform will be an electric version of the VW Golf—an important model for VW that will follow the smaller ID.3 hatch that has been kept out of North America.

Project Trinity, meanwhile, is now slated to be produced at the existing Zwickau plant that had kicked off the ID lineup a few years ago.

This development itself may not be all that surprising to those who've been watching VW's progress closely. Demand for EVs in Europe and a number of other regions appeared to lose quite a bit of steam in late 2022, prompting a price war and some production cuts among automakers.

VW executives have grumbled about slowing EV demand in the past several months, even prior to the arrival of more EV models stateside, which are now scheduled for 2024.

"Our industry faces complex challenges as it undergoes a transformation that is being conducted under difficult business conditions. It is all the more important that we prepare our individual plants and the Volkswagen production network in Germany for the future," Thomas Schäfer, CEO of the Volkswagen brand said a few days ago in announcing the latest vehicle allocation plan.

Overall, the slowdown observed in late 2022 appeared to coincide with production finally catching up to demand. In effect, those who had rushed out to buy an EV early on in the pandemic appear to have finally received their cars, and automakers now faced the task of finding and converting new buyers at a time when economic clouds are again appearing on the horizon.

In the midst of electrifying its lineup, VW has also struggled to make progress in streamlining its own operations—an issue that has been a challenge since the early days of EV efforts in Wolfsburg.

"We are using the transition to electromobility as an opportunity to reduce the complexity of our production operations and increase the efficiency of our plants even further," said Christian Vollmer, the Volkswagen brand Board of Management member for production. "We are systematically bundling vehicles based on the same architecture across all brands in our plants."

It remains to be seen how well the next two electric VW models will be received stateside, with the ID.7 sedan and the ID. Buzz minivan due here next year after quite a few years in development.

Will the ID.7 be able to favorably compete against the aging Tesla Model 3, or has Tesla pulled far ahead of VW when it comes to EVs in the states? Let us know what you think.