Volkswagen’s Solution To The Chip Shortage

Supply chain issues and semiconductor shortages are taking their toll on Germany’s most famous brand…but they’ve come up with a solution.

I’ve never seen the appeal of Volkswagens (VWAGY).

Honesty, I’ve just never really appreciated the brand’s cars, especially the Beetle.

Hopefully, neither my mother nor my grandmother read this, because both of them LOVED their VW Bugs with a passion. To this day, my grandmother STILL brings up the fact that my grandfather traded in her VW without consulting with her.

However, since the 1960s, VWs have become popular in the United States, and there are MILLIONS of people who will be more than happy to tell you why.

There’s just something about that car that elicits emotions from some people, and you can’t convince them that there are better cars out there.

These people are fiercely loyal to the brand and nothing will convince them that a better car exists.

I had an ex-girlfriend who ONLY drove VWs. She had had four cars by the age of 22, each and every one of them a Volkswagen. In fact, I recently saw her in a picture on Facebook posing with her current car…and would you care to guess which kind it was?

If you guessed VW, give yourself a gold star.

Good to see some things never change.

Big Changes Coming For VW

There is a problem on the horizon for VW fanatics, though.

VWs may soon be going for a premium price compared to Porsche and Audi, the company’s other brands.

Original VWs are about to become significantly rarer, as the company has plans that will rock their devoted fans to the core.

Volkswagen just announced that it will be dumping DOZENS of models by 2030 in a plan to actually sell FEWER cars so the company can concentrate on producing more profitable, premium vehicles.

That’s right…Volkswagen, literally the “people’s car,” will be turning its nose up at its traditional best sellers in order to rake in all of those luxury and sports brand dollars.

CFO Arno Antlitz said, “The key target is not growth. We are [more focused] on quality and on margins, rather than on volume and market share.”

Antlitz went on to reveal that VW plans to reduce its line-up of 100 models across several brands by 60% over the next eight years.

That’s a LOT…but the pandemic and all the issues that have come along because of it has forced a lot of companies to take a good hard look at themselves and figure out if and how they’re going to survive.

How VW Plans To THRIVE… Not Survive

Supply chain issues were bad, but the severe microchip shortage made it even worse, forcing carmakers to cut production last year, even in the face of surging demand.

This allowed brands such as Mercedes and BMW to profit big by providing an opportunity for astronomical price hikes. Car companies are charging more for their cars…and they’re getting it.

This strategy has helped VW too because as the company prioritized its premium brands, Audi and Porsche, they’ve been able to rack up more than $20 billion in profits.

Antlitz went on to say, “We have [a significantly] lower fixed-cost base, so we are less dependent on volume and less dependent on growth.”

He then pointed out the fact that VW had managed to reduce fixed costs of more than $43 billion by 10% over the last three years, a number that is already ahead of schedule.

This has been reflected in Volkswagen’s share price, which has been up over 20% since 2019.

However, that being said, VW is still scoring a “neutral” on the StockPower Rating system.