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 founded Audi here in the early 20th century.
So when Volkswagen announced in 2018 that it would convert its factory in Zwickau, the largest private employer in the region, to make nothing but 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 of a century. They asked themselves: “What will happen?” he said.
Volkswagen shut down assembly lines building its popular Golf hatchbacks and converted the factory, which has its own highway exit, to six electric models. The renovated factory can produce one car per minute, sending it by train.
It was a rare case of a major car factory making the complete switch from internal combustion to battery power, making Zwickau a case study for a big question facing the automotive industry.
Electric vehicles have far fewer components than petrol cars – no radiators, exhaust pipes, fuel tanks, fan belts or complicated gearboxes. As a result, many auto workers, executives and politicians have assumed that such cars would require fewer workers, leading to mass unemployment in factories in cities and towns worldwide.
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 hasn’t fallen off the cliff and suppliers of internal combustion vehicle parts haven’t been forced into massive bankruptcy. His experience offers some hopeful lessons for other places that depend on the auto industry.
However, people in Zwickau, with its immaculate but sleepy downtown, are still worried.
While Zwickau’s experience suggests that the shift to electric vehicles won’t lead to economic misery by itself, this and other new technologies are shaking up the industry in ways that could still be very painful for established companies and their workers.
One big change already visible in Germany and the rest of Europe is the rapid growth of new Chinese electric car makers such as BYD and SAIC, which are increasingly luring customers away from established rivals such as Volkswagen, the second-largest automaker in the world. world after Toyota.
“The question is: How much will mobility change overall?” said Thomas Knabel, who heads the Zwickau local of IG Metall, the union representing Volkswagen workers. “In the future, will Volkswagen still be around?”
The best-selling electric car in Europe is Tesla’s Model Y sport utility vehicle, built at a plant about 145 miles north of Zwickau near Berlin. Last year, Volkswagen sold less than half of its SUV equivalent, the ID.4, according to Schmidt Automotive Research.
Disappointing sales have prompted Volkswagen to cut a switch to one of two assembly lines in Zwickau, where the company builds the ID.4, ID.5, two Audi models and two small electric cars. The decision proved the downside of going all-in on electric vehicles. Other established automakers have hedged their bets by producing electric vehicles and gasoline-burning cars in the same factories, allowing them to adjust to fluctuating sales.
“It’s 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 area around Zwickau. “VW has taken a much bigger risk.”
With the plant operating below capacity, some people in Zwickau are wondering if 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 Teslas, Teslas, Teslas,” said Mr. Jankowsky, who is also president of a company that makes cast iron parts for Volkswagen suppliers and other manufacturers.
Volkswagen executives say they expect sales to pick up this year as it starts selling new models, including a station wagon and a van, targeting market segments in which Tesla is not playing.
“We are aware of our current challenges and are tackling them rigorously,” Oliver Blume, Volkswagen’s chief executive, said in a statement last month.
In the short term, at least, the pain to the local economy caused by the conversion of the Zwickau plant has been surprisingly mild, local officials, business leaders and worker representatives say.
Increased demand for workers making electronic components largely offset job losses from production lines making parts for internal combustion cars, according to a study by AMZ Saxony, a supplier group.
“Overall,” said Dirk Vogel, CEO of AMZ, “not that much happened.”
Volkswagen, local businesses and officials coordinated an effort to prepare workers and businesses, softening the impact.
The automaker has expanded its training institute in Zwickau to teach employees about electric vehicle technology. To generate excitement, Volkswagen allowed employees 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, expanded courses related to electric vehicle technology.
Suppliers have developed new components for electric vehicles to replace products that are at risk of becoming obsolete. Eberspächer, a German supplier that has a factory 60 miles east of Zwickau, near Dresden, has begun offering temperature control systems for electric vehicles in addition to emissions systems for conventional cars.
Few suppliers have suffered. GKN Driveline, which makes drive shafts unnecessary in most electric cars, is closing a factory in Zwickau and moving production to Hungary. However, GKN did not supply Volkswagen and the closure appears to be a reaction to wider trends in the industry 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 town of Chemnitz. The company, which is partly owned by Volkswagen, is one of five companies in the region developing self-driving technology.
Zwickau benefits from a unique stroke of good fortune. Many local suppliers make seats, dashboards, paint equipment or other products that electric vehicles need just 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 only risen modestly. It was 6.6 percent in March amid an overall economic slowdown, up from 6.3 percent a year earlier.
“There will be suppliers that will disappear,” said Karsten Schulze, FDTech’s chief executive. “But skilled workers will immediately be sought elsewhere.”
Volkswagen workers had some control because German law requires their opinion on changes affecting working conditions. The IG Metall union received a promise from the company not to lay off any full-time workers in Zwickau until 2030 at the earliest. However, the guarantee does not apply to temporary workers and the company let 270 of them go after their contracts expired.
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 Automobile Workers is trying to change that. But even if the union is successful, American companies will have no obligation to consult workers about changes that will affect their jobs or train them for new jobs. And there’s no guarantee that new battery manufacturing jobs, for example, will pay as well as jobs in factories where cars are assembled.
Residents note with pride that Zwickau has survived many upheavals. After Germany’s defeat in World War II, the Soviet occupiers confiscated Audi’s manufacturing equipment. The automaker 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 and had plastic bodies due to a lack of steel. They could not compete with Western cars after German reunification in 1991. Thousands of Trabant workers lost their jobs. In the late 1990s, unemployment in the region exceeded 20%.
Volkswagen acquired the Zwickau plant after reunification and gradually expanded it into one of the company’s largest production plants. The shift to electric cars was important enough that Angela Merkel, the German chancellor at the time, attended a dedication 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 Deutschland party, which holds 11 of the 48 seats on the Zwickau City Council, complained that Germans are being forced to buy electric vehicles, echoing comments by former President Donald J. Trump and other Republicans.
The national government, led by Chancellor Olaf Solz, a Social Democrat, angered many in Zwickau when it sharply 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 account for 12 percent of new cars.
However, few people in Zwickau are pushing for Volkswagen to return to making gasoline cars.
“With the transition to a new technology, the question is always: Are you the first or the last?” said Constance Arndt, the Lord Mayor of Zwickau. “I think it’s always better to be first.”
