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 at the beginning of the 20th century.
So when Volkswagen announced in 2018 that it would convert its factory in Zwickau, the area’s largest private employer, to produce nothing but electric cars, it was a big deal.
“A lot of people are skeptical,” said Michael Fuchs, who has worked at the factory for more than a quarter century. They wondered, “What will happen?” he said.
Volkswagen shut down the assembly lines churning out its popular Golf hatchbacks and converted the factory, which has its own autobahn exit, to produce six electric models. The remodeled plant could produce a car in a minute, shipping them by train.
It’s a rare case of a large car plant completely switching from internal combustion to battery power, making Zwickau a case study for a big question facing the auto industry.
Electric cars have fewer parts than gasoline cars — no radiators, exhaust pipes, fuel tanks, fan belts or complicated gearboxes. As a result, many autoworkers, executives and politicians hypothesized that such cars would require fewer workers, leading to mass unemployment in factory towns and cities around the world.
Zwickau, where more than 10,000 people work for Volkswagen and tens of thousands more for suppliers, appears to have avoided dire consequences. Employment hasn’t yet fallen off the cliff, and auto parts suppliers haven’t been forced into bankruptcy en masse. Its experience offers some hopeful lessons for other areas that rely on the auto industry.
But people in Zwickau, with its clean but sleepy downtown, are still uneasy.
While Zwickau’s experience suggests that the conversion to electric vehicles won’t itself lead to economic hardship, it and other new technologies are shaking up the industry in ways that could still be painful for established companies and their workers.
One big change already visible in Germany and the rest of Europe is the rapid growth of young Chinese electric carmakers like BYD and SAIC, which are increasingly driving customers away from old rivals like Volkswagen, the second largest automaker in the world after Toyota.
“The question is: How much will change in total?” said Thomas Knabel, who heads the Zwickau local of IG Metall, the union representing Volkswagen workers. “In the future, will Volkswagen still be there?”
The best-selling electric car in Europe is Tesla’s Model Y sport utility vehicle, built in a factory around 145 miles north of Zwickau near Berlin. Last year, Volkswagen sold less than half as many of its SUV equivalent, the ID.4, according to Schmidt Automotive Research.
Disappointing sales prompted Volkswagen to cut a shift at one of its two assembly lines in Zwickau, where the company makes the ID.4, the ID.5, two Audi models and two small electric car. The decision illustrates the downside of going all-in on electric vehicles. Other established automakers have hedged their bets, making electric vehicles and gasoline-burning cars in the same factories, allowing them to adjust to fluctuating sales.
“This is a more ambitious project than anything I know about in North America,” said Ian Greer, a research professor at Cornell University who has studied the region around Zwickau. “VW took a bigger risk.”
With factory capacity low, some people in Zwickau wonder if Volkswagen’s electric cars are attractive enough.
Max Jankowsky, president of the regional Chamber of Commerce, said he was disappointed he didn’t 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 suppliers to Volkswagen and other manufacturers.
Volkswagen executives said they expect sales to pick up this year as it starts selling new models, including a station wagon and a van, targeting market segments Tesla doesn’t play.
“We are aware of our current challenges and we are tackling them firmly,” Oliver Blume, Volkswagen’s chief executive, said last month in a statement.
In the short term, at least, the pain to the local economy caused by the Zwickau factory transformation is surprisingly mild, local officials, business leaders and labor representatives say.
Increased demand for workers to make electronic components has more than compensated for job losses from production lines that make parts for combustion vehicles, according to an AMZ study Saxony, a group of suppliers.
“All in all,” said Dirk Vogel, chief executive of AMZ, “not much happened.”
Volkswagen, local businesses and officials have coordinated efforts to prepare workers and businesses, mitigating the impact.
The carmaker has expanded its training institute in Zwickau to teach employees about electric vehicle technology. To generate enthusiasm, Volkswagen allowed workers 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, has expanded courses related to electric vehicle technology.
Suppliers develop new components for electric vehicles to replace products at risk of becoming obsolete. Eberspächer, a German supplier with 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 vehicles. .
Several suppliers suffered. GKN Driveline, which makes drive shafts that are not needed in most electric cars, is closing a factory in Zwickau and moving production to Hungary. But GKN did not supply Volkswagen, and the closure appears to be a reaction to broader industry trends and German manufacturing 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, Chemnitz. The company, partially owned by Volkswagen, is one of five companies in the area developing autonomous driving technology.
Zwickau benefits from some exceptional good fortune. Many local suppliers make seats, dashboards, painting equipment or other products needed by electric vehicles such as gas stations.
Due to a shortage of electricians, engineers and other skilled workers, the unemployment rate in the state of Saxony, which includes Zwickau, has risen moderately. It was 6.6 percent in March amid a general economic slowdown, up from 6.3 percent a year earlier.
“There will be suppliers that will disappear,” said Karsten Schulze, the managing director of FDTech. “But skilled workers will soon be sought elsewhere.”
Volkswagen workers had some control because German law required them to be consulted on changes affecting working conditions. The IG Metall union obtained a commitment from the company not to lay off any full-time employees in Zwickau until 2030 at the earliest. The guarantee did not apply to temporary workers, however, 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 factories in the South are not unionized. The United Automobile Workers is trying to change that. But even if the union is successful, US companies have no obligation to consult workers about changes that will affect their jobs, or to retrain them for new jobs. And there’s no guarantee that new jobs making batteries, for example, will pay as well as jobs in the factories where cars are built.
Residents are proud that Zwickau has survived many disturbances. After Germany’s defeat in World War II, the Soviet occupiers confiscated Audi’s manufacturing facilities. The carmaker moved to Bavaria and was later acquired by Volkswagen.
The Communist government that ruled East Germany converted the Zwickau factory to produce useless Trabant cars. Cars spewed blue exhaust and had plastic bodies due to a shortage of iron. They could not compete with Western cars after the reunification of Germany in 1991. Thousands of Trabant workers lost their jobs. By the end of the 1990s, unemployment in the region exceeded 20 percent.
Volkswagen acquired the Zwickau factory after the reunification and gradually expanded it into one of the company’s largest production sites. The conversion 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 in Zwickau City Council, complained that Germans were being forced to buy electric cars, echoing comments from former President Donald J. Trump and other Republicans.
The national government, led by Chancellor Olaf Scholz, a Social Democrat, angered many in Zwickau when it abruptly cut subsidies for electric cars last year to deal with the budget crisis. Sales of electric cars in Germany fell 14 percent in the first three months of the year, although they still accounted for 12 percent of new cars.
However, some people in Zwickau are pushing for Volkswagen to return to producing gasoline vehicles.
“In a 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.”
