Volkswagen is reportedly considering moving Golf production out of Germany to improve its profit margins and a return to Mexico seems plausible. If so, the hatchback would almost certainly go back on sale inside North America.
News comes via Germany’s Handelsblatt, which has claimed VW wants to relocate Golf production out of regions where the high cost of labor undermines how much money the brand can make on each model sold — especially now that there’s a growing demand for affordable transportation.
When Volkswagen pulled the Golf from our market, automakers were aggressively chasing product margins and hoping to sell the most profitable vehicles they had in their lineup. But that never ever ends up being a company’s affordable economy model and domestic production of the hatchback (at least those sold on our market) was handled where labor is cheap in Puebla, Mexico.
By 2020, Volkswagen had already put the Mk8 Golf into production for Europe and placed a stronger emphasis on China. Volkswagen de México would end production of the Golf the following year, putting its focus instead on building the Taos, Tiguan, and maintaining production of the Jetta sedan. North American volumes of the Mk7 Golf were likewise declining and VW was already planning to put the combustion version of the hatchback on ice so it could make way for the all-electric version.
But the market has shifted and consumers are now much less willing to endure the kind of lofty pricing we’ve seen over the last several years. Volkswagen Jetta sales were up 76 percent in the U.S. through the first half of 2024 and are likely to stay high as consumers seek more affordable options. During a Jetta drive event from earlier this year, your author asked VW representatives what the prospects of the Golf returning to America might be — noting that it’s effectively just the hatchback variant of the vehicle they just saw renewed interest in.
While answers were noncommittal, there was a sense that the company had been thinking about it and there were plenty of good reasons as to why.
Volkswagen suggested it could close as many as three of its German factories in October, impacting Golf production. German unions have been at odds with the company for a while, especially in regard to cutting jobs to make way for leaner EV-focused assembly lines. Cost of living has also spiked in Germany, encouraging workers to demand higher wages. But VW is seeking $4.3 billion in costs and has told workers that layoffs and pay cuts should be expected.
With Germans demanding higher wages and threatening sustained strikes, it may just be easier for Volkswagen to allocate production elsewhere. Labor costs in Mexico are significantly lower than Europe, allowing for higher profit margins on cheaper vehicles.
Handelsblatt suggested that VW had been considering moving the Golf out of Europe for quite some time, comparing the situation to what happened with the Beetle decades earlier. The obvious choice is sending it back to Mexico, or perhaps Poland. Despite the company still championing the upcoming all-electric Golf, slated for arrival in 2028, it undoubtedly knows that North America’s longer driving distances will make the combustion variant more appealing — strengthening the case to shift production back to Mexico.
But this would only pertain to the standard, gasoline-powered Golf. Volkswagen has been fairly adamant that it wants to keep production of the performance-minded GTI and Golf R at the Wolfsburg Plant (pictured) in Germany.
[Images: Volkswagen]
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Source: The Truth About Cars
