Volkswagen’s Spanish EV Bet Highlights Germany’s Cost Disadvantage as Union Battles Plant Closure Fears

Volkswagen began assembling two new volume electric models in Martorell, Spain, in early June 2026 — the ID. Polo and the Cupra Raval. The move underscores a strategic dilemma: why are mass-market EVs being built in southern Europe rather than on home soil? Industry expert Stefan Bratzel offered a blunt answer: entry-level models priced under €25,000 cannot be produced economically in Germany under current conditions. Spain offers lower labour costs, state subsidies approaching €400 million, and cheap solar power, making it an attractive hub for VW’s electric future.

The pressure on Volkswagen’s domestic operations is mounting. On Germany’s home market, the company’s sales fell 8.9 percent in May 2026 compared with the same month a year earlier, according to figures from the Kraftfahrt-Bundesamt (Federal Motor Transport Authority). Meanwhile, rivals such as BYD and Tesla posted sharp gains. In response, CEO Oliver Blume used the Spanish launch event to call for stricter European tariffs on foreign manufacturers, particularly criticising that hybrid vehicles from China remain exempt from certain EU punitive duties.

Works council representatives in Germany are fighting to defend their plants. At a company assembly on June 4, 2026, Björn Harmening, chairman of the works council at the Salzgitter site, firmly rejected speculation that the factory might be closed. He pointed to agreements reached in 2024 that explicitly rule out shutting down locations. Salzgitter is not only a production site but also the headquarters of VW’s battery subsidiary PowerCo. Despite headwinds from trade conflicts, rising material costs, and Chinese competition, the workforce representatives remain committed to the electric-vehicle transition.

Elsewhere, the situation is more precarious. In Zwickau, Saxony — a plant already fully converted to EV production — capacity utilisation remains uncertain. The workforce has already shrunk from more than 10,000 employees to around 8,000, and further job cuts are on the table. The IG Metall union has renewed its demand for a binding commitment that no works will be shuttered. At the latest works council elections in Zwickau, the union cemented its position by winning 29 of the 35 seats, quelling fears of a political shift to the right among the workforce. CFO Arno Antlitz warned in a recent analysis that the coming months will be decisive for the group’s long-term future.

The Osnabrück plant faces a definitive end to vehicle production, scheduled to conclude in September 2027. What comes next remains unclear. Environmental group Robin Wood proposed in a short study that the site be repurposed for building minibuses for public transport. Meanwhile, management is also exploring options in the defence sector as an economic alternative.

Consultancy EY notes that foreign manufacturers are gaining market share, particularly in the low-price segment. European automakers are increasingly burdened by overcapacity. According to an analysis by the Neue Zürcher Zeitung, only 40 out of 100 European car plants are currently operating at more than 80 percent capacity.

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