Recovering demand is crucial to the sustainability of restarted production at Volkswagen

Following the news that the production of vehicles at Volkswagen’s (VW) main Wolfsburg plant in Germany has restarted after a period of shutdown due to the impact of the COVID-19 crisis;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his views:

“The news from Volkswagen is a welcome sign of a corner being turned in Germany, the engine of Europe’s manufacturing sector. The resumption is an important signal for the VW workforce, dealerships, suppliers and the wider economy. There is a need for perspective though.

“VW said production will be starting at 10-15% of capacity, increasing to around 40% over the following week. That low rate of capacity utilisation points to the challenge ahead in calibrating production levels to demand.

“Over the next few weeks, we will see how far demand for new vehicles is recovering and where production levels can realistically settle for the short term. Much depends on a broader return of consumer and business confidence in the coming months.

“In the automotive industry, many prospective customers will also be waiting to see if the sector receives special support, for example in the form of government funded scrappage incentives to encourage the purchase of greener cars. Calls for clarity on that will get louder.”

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