Will Wolfsburg's fortunes whittle as VW faces a crisis?

The first thing you see when rolling into the German city of Wolfsburg in Lower Saxony by train are four giant smokestacks rising from a huge factory building that carries the VW logo in blue and white on the front of its reddish-brown brick walls. Welcome to Volkswagen city, home to one of the biggest car-making factories in the world.  

Wolfsburg is one of the few German cities built during the first half of the 20th century as a planned city, meaning it was designed for a purpose and constructed on previously undeveloped land.

Founded by Hitler's Nazi regime on 1 July 1938, Wolfsburg was built to become home for workers producing the the so-called KdF-Wagen — a low-cost, affordable car that was built until 1945 to please the masses, part of the Third Reich's Kraft durch Freude (Strength through Joy) campaign.

Wolfsburg exists because of the Volkswagen (VW) car factory, and some say if VW sneezes, Wolfsburg is catching a cold.

Wolfsburg dreams come undone

At the moment, VW's emerging crisis is talk of the town, as Europe's biggest carmaker is for the first time in its history planning to close German plants and lay off thousands of workers. 

More than 60,000 people work for VW, out of a total of 120,000 living in Wolfsburg. VW's wages are above average, making the company's labor costs the highest in the car industry with about €62 ($67) earned for an hour of work in 2023.

Kristin Rößer says here the typical German dream of a house with a garden, a car, and a wife with two kids is still alive. The real estate agent is showing DW around a bungalow-style house which, she says, is quite typical for many VW workers' homes in Wolfsburg.  A room divider, petrol-colored PVC floors, and yellow kitchen tiles hark back to the days when many of these homes were built in the 1960s. 

Those were golden days for VW, remembers Rößer, who's been living in Wolfsburg for all of her life.  

These days, however, she's feeling huge uncertainty gripping the city, with not a few VW workers calling her to "sell their houses before their value collapses," as she says. Other clients had cancelled home-buying contracts even before they had actually moved in. 

"People are hesitating to buy a new house and want to keep their money together until they know what VW will decide," she says.

In 2023, the 10-brand car group still posted sound profits totaling more than €18 billion, and paid out €4.5 billion in dividends to shareholders. Nevertheless, VW management launched an efficiency program last year aimed at saving €10 billion by 2026 to boost competitiveness.

In August 2024, however, management said further savings measures were required, including the closure of possibly two car plants in Germany and steep cuts to the company's 120,000-strong workforce in Germany.   

Concerned silence at the gates

On this afternoon in October, the sun is casting a mild autumn light on Gate 17 of the sprawling VW site. Hundreds of workers are flooding through it, after finishing their morning shift at 2 p.m. They're wearing white overalls and sweaters or shirts emblazoned with the VW logo. 

As they head for the huge car park outside the factory, their mood seems subdued, and hardly anyone wants to speak to DW or even have their photos taken by the reporter. 

Following massive media coverage of VW's troubles in recent weeks, most of them are not in the mood to answer the same question again and again. Of course, workers fear for their jobs, says one man, and another one adds that all they can do now is remain confident about the future of the carmaker. "We have survived many crises, we will survive this one, too," he says.

With a median income of €5,238, Wolfsburg has one of the richest city populations in Germany, second only to those living in Ingolstadt, where carmaker Audi is based.

The times are changing for Wolfsburg

Business taxes levied on VW's massive profits have made Wolfsburg wealthy, but now the city is showing the ubiquitous signs of economic decline.

The city center, which is encircled by broad streets with plenty of parking spaces, is deserted on this sunny afternoon. Some shoppers stroll down Porsche Street, but they are mostly passing by empty shop windows, a few nickel-and-dime stores and the flickering lights of an occasional gambling hall.

The few cafes and bars along the high-street boulevard are also not well-frequented as a warm day in October might suggest.  

Djuliano Saliovski says that not long ago many of his customers used to come for dinner once a week, but now they often only come once a month.

A refugee from Kosovo, Saliovski and his wife opened a hotel with restaurant in Wolfsburg several years ago, and they are popular with their customers, greeting most of them personally by their names.   

The COVID-19 pandemic two years ago had already significantly reduced the number of dinner and hotel reservations, he says, "but now they are even fewer." At this time of the year, he notes, there would be many bookings for Christmas coming in, but not so this year.   

Still, he believes, the situation will "turn around," and he's even panning to expand his business in Wolfsburg by buying a new building in addition to the properties he already owns in the city.

Wolfsburg's fear of becoming an industrial museum

The glorious days of car production in Wolfsburg are on display in the Volkswagen Museum along Diesel Street. A huge lineup of vintage cars includes all of the company's most popular models, including the famous Beetle that was produced more than a million times between 1938 and 2003, or the VW minibus known as the wagon of choice of the German flower-power generation of the late 1960s.

The museum is a must-see on the itineraries of tourists, of whom more than 300,000 are coming to visit Wolfsburg every year. Apart from that, the so-called Autostadt (auto city) is a point of attraction — a 28-hectare automobile theme park offering glimpses into "the world of mobility," and the place where more then three million drivers have been handed the keys to their new VW cars so far. 

But fewer and fewer tourists have been coming to visit Wolfsburg, a taxi driver told DW, noting that several years ago taxi companies could "hardly cope with the demand from tourists and business travelers."

Could that be an ominous sign that Wolfsburg's days as the car production capital of Europe are numbered? Is it possible that Volkswagen, the leading auto manufacturer by sales still a few years ago, isn't able to win over enough customers for its electric vehicles that are supposed to be the future of the industry?

The Wolfsburg taxi driver has a clear opinion about Volkswagen and its global leadership in the combustion-engine era: "Those times are long gone," he says, adding that he thinks the situation could be "getting even worse." 

Edited by: Uwe Hessler