The eastern German city of Zwickau may not be as famous as Detroit, but its economy has revolved around the internal combustion engine ever since August Horch founded Audi here in the early 20th century.
So when Volkswagen announced in 2018 that it would convert its Zwickau plant, the region's largest private employer, to exclusively producing electric vehicles, it made headlines.
“A lot of people were skeptical,” said Michael Fuchs, who has worked at the plant for more than a quarter of a century. They wondered, “What will happen?” He said.
Volkswagen has shut down the assembly line that mass-produces its popular Golf hatchback and converted a factory with its own exit along the Autobahn to produce six electric models. The converted factory will be able to produce one car per minute and transport it by train.
This is a rare case where a major car factory completely switches from internal combustion engines to battery power, making Zwickau a case study in the big problems facing the auto industry.
Electric cars have far fewer parts than gasoline cars, with no radiators, exhaust pipes, fuel tanks, fan belts or complex gearboxes. As a result, many autoworkers, executives, and politicians hypothesized that such cars would require fewer workers, leading to mass unemployment in mill towns and cities around the world. It's standing up.
In Zwickau, where more than 10,000 people work at Volkswagen and tens of thousands more at suppliers, such a dire outcome appears to have been avoided. Jobs haven't fallen off a cliff, and suppliers of internal combustion engine car parts haven't gone out of business en masse. The experience offers hopeful lessons for other regions dependent on the auto industry.
But the people of Zwickau, with its clean but quiet downtown, remain anxious.
In Zwickau's experience, the transition to electric vehicles does not in itself lead to economic hardship, but this and other new technologies are shaking up industries and can still cause significant pain for existing companies and their employees. There is a possibility that
One of the big changes already visible in Germany and other European countries is the rapid growth of young Chinese electric car makers like BYD and SAIC, which are now the world's second-largest car makers after Toyota. It is increasingly drawing customers away from established rivals like Volkswagen.
“The question is: how much will mobility change overall?” said Thomas Knabel, head of the Zwickau regional group of IG Metall, the trade union representing Volkswagen workers. “Will Volkswagen still exist in the future?”
Europe's best-selling electric car is Tesla's Model Y sport utility vehicle, which is built at a factory about 145 miles north of Zwickau near Berlin. According to Schmidt Automotive Research, Volkswagen sold less than half the number of its ID.4 SUV last year.
Due to weak sales, Volkswagen has cut shifts on one of its two assembly lines in Zwickau, where it produces the ID.4, ID.5, two Audi models and two small electric cars. The decision highlighted the downside of going all-in on electric vehicles. Other established automakers are also hedging risk by building electric and fuel-powered vehicles in the same factories so they can adapt to fluctuating sales.
“This is a far more ambitious project than anything I know of in North America,” said Ian Greer, a research professor at Cornell University who has studied the area around Zwickau. “VW took a much bigger risk.”
With factories operating below capacity, some people in Zwickau are wondering whether Volkswagen's electric cars are attractive enough.
Max Jankowski, president of the local chamber of commerce, said he was disappointed not to see any Volkswagens during a recent visit to Dubai. “It was just Tesla, Tesla, Tesla,” Jankowski said. He is also president of a company that makes cast iron parts for Volkswagen suppliers and other manufacturers.
Volkswagen executives said they expect sales to pick up this year as Tesla begins selling new models, such as station wagons and vans, targeting market segments it doesn't have a presence in.
“We are aware of the current challenges and are tackling them rigorously,” Volkswagen CEO Oliver Blume said in a statement last month.
At least in the short term, the Zwickau factory conversion has caused surprisingly little pain to the local economy, local officials, business leaders and labor representatives say.
Increased demand for workers making electronic components has almost offset the loss of jobs from production lines making parts for internal combustion vehicles, according to a study by supplier organization AMZ Saxony.
“Overall, not much happened,” AMZ CEO Dirk Vogel said.
Volkswagen, local businesses and officials coordinated efforts to prepare workers and businesses to mitigate the impact.
The car manufacturer has expanded its training institute in Zwickau to teach employees about electric vehicle technology. To build enthusiasm, Volkswagen allowed employees to borrow battery-powered cars for a few days. The West Saxon University of Applied Sciences in Zwickau, a state university that was already focused on the automotive industry, has expanded its courses related to electric vehicle technology.
Suppliers have developed new parts for electric vehicles to replace products in danger of becoming obsolete. Eberspächer, a German supplier with a factory 90 miles east of Zwickau near Dresden, has begun offering temperature control systems for electric vehicles in addition to exhaust systems for conventional cars.
Several suppliers have been affected. GKN Driveline, which eliminates the need for driveshafts in most electric cars, will close its factory in Zwickau and move production to Hungary. However, since GKN did not supply products to Volkswagen, the closure appears to be a reaction to broader industry trends and German labor costs. GKN did not respond to requests for comment.
The new technology has also created jobs, including 175 at FDTech, based in the nearby city of Chemnitz. The company, partly owned by Volkswagen, is one of five companies developing self-driving technology in this field.
Zwickau has benefited from a unique stroke of good fortune. Many local suppliers make the seats, dashboards, paint equipment and other products that electric cars need just like gas-powered cars.
Unemployment in Saxony, which includes Zwickau, has increased only slightly due to a shortage of electricians, engineers and other skilled workers. Amid the overall economic slowdown, the rate of return in March was 6.6%, up from 6.3% in the same period last year.
“Some suppliers will disappear,” says Carsten Schulz, managing director of FDTech. “But skilled workers will soon be needed elsewhere.”
Volkswagen workers had some control because German law requires them to be consulted about changes that affect working conditions. The IG Metall trade union has extracted a commitment from the company that full-time Zwickau employees will not be laid off until 2030 at the earliest. However, this guarantee did not apply to temporary employees, and the company fired 270 of them after their contracts expired.
In the United States, unions are relatively strong in the Midwest and East, but there are no unions in most auto plants in the South. The United Auto Workers union is trying to change that. But even if a union is successful, U.S. companies are under no obligation to consult workers about changes that affect their jobs or retrain them for new jobs. And there's no guarantee that a new job making batteries, for example, will pay as well as a job in a factory that assembles cars.
Residents are proud of the fact that Zwickau has survived many upheavals. After Germany's defeat in World War II, the Soviet occupation forces confiscated Audi's manufacturing equipment. The car manufacturer moved to Bavaria and was later acquired by Volkswagen.
The communist government that ruled East Germany converted the Zwickau factory to produce no-frills Trabant vehicles. The cars spewed blue exhaust fumes and were made of plastic due to a lack of steel. After German unification in 1991, Trabant could no longer compete with Western cars and thousands of Trabant employees lost their jobs. By the end of the 1990s, unemployment in the region exceeded 20%.
After the merger, Volkswagen acquired the Zwickau plant and gradually expanded it into one of the company's largest production sites. The transition to electric vehicles was so significant that then-German Chancellor Angela Merkel attended the inauguration ceremony in 2019, when the first battery-powered models rolled off the assembly line.
Not all Zwickau residents are fans of electric cars. The far-right Alternative for Germany party, which holds 11 of the 48 seats on the Zwickau city council, echoed comments by former President Donald J. Trump and other Republicans, saying Germans should be forced to buy electric cars. expresses dissatisfaction with the situation.
The central government, led by Social Democratic Chancellor Olaf Scholz, suddenly cut subsidies for electric cars last year to deal with a budget crisis, angering many people in Zwickau. Sales of electric cars in Germany fell by 14% in the first three months of this year, but the share of electric cars in new cars was still 12%.
Still, few in Zwickau want Volkswagen to return to making gas-powered cars.
“When transitioning to new technology, the question always arises: Are you the first or the last?” said Constance Arndt, mayor of Zwickau. “I think it's always good to be the best.”
