“The partnership will expand from the existing commercial service in Zagreb, coming soon to the Uber platform, to four additional cities in Europe. Additional details about the rollout will be announced in phases, and the expanded partnership also includes plans to deploy in the Middle East,” the companies said.

“The expanded agreement gives Pony.ai’s joint-deployment model a clearer path to commercial scale. The model brings together three core functions required to operate Robotaxi services at scale: Level 4 (L4) autonomous driving technology, a leading mobility platform, and day-to-day fleet operations. It allows technology, platform, and fleet partners to work together in the same market, while individual partners may also take on more than one role. Vehicle funding and ownership can sit with different partners depending on the market,” Pony remarked.

In the expanded partnership, Pony.ai will supply its L4 autonomous driving technology, rider experience, and knowledge gained from running many Robotaxi services, while Uber will offer customer access through its top global mobility platform, which includes booking, payment, and customer service, as well as its increasing number of human drivers.

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“The facility is intended at narrowing the gap between global chip supply and the more than 1 terawatt of computing power that SpaceX and Tesla expect to need in the coming years,” the companies said.

“Future expansion phases could push total investment much higher,” SpaceX remarked, while adding that the facility would employ at ⁠least 3,000 people in the coming days.

“The Terafab is bringing cutting-edge manufacturing to America, creating thousands of high-paying jobs in the Lone Star State, and enabling us to produce AI chips at scale for use on Earth and in space,” Musk said, while reacting to the news.

The tech titan has been closely integrating AI efforts across his companies, with SpaceX acquiring his startup xAI earlier in 2026 in a deal focused on building space-based data centers, before going public in June in the world’s largest-ever IPO.

“The vertically integrated, 100-million-square-foot Terafab plant will make, package and test advanced logic and memory chips under one roof, ‌producing ⁠processors needed to power Tesla’s Optimus robots and Cybercabs, as well as high-power chips to run SpaceX’s space-based data centers,” the companies said.

As per a May 2026 filing, SpaceX had proposed an initial investment of USD 55 billion to build the Terafab, with the total amount rising to USD 119 billion if extra phases are completed.

As part of the project, SpaceX ⁠earlier this year partnered with Intel, which has been trying to expand its chip manufacturing business as part of a turnaround effort.

In April, Tesla broke ground on a research facility at the North Campus of ⁠its Giga Texas plant, calling it the precursor to Terafab. The Grimes County site sits near the Gibbons Creek Reservoir, whose water Tesla and SpaceX are planning to use for industrial operations rather than local groundwater.

The Terafab development comes amid speculation about the possible merger between Tesla and SpaceX, with Musk citing growing overlap between the companies.

“As you can tell from the many collaborations on so many fronts with SpaceX, there’s more and more overlap. We can’t talk about, you know, combining companies and that kind of thing on an earnings call. It’s got to be done with the appropriate process,” he said during Tesla’s Q2 earning call on July 23.

Tesla already supplies batteries and manufacturing technologies for SpaceX projects, apart from collaborating on the Terafab project.

As a section of analysts believes that combining the companies could simplify Musk’s corporate empire and create a more integrated company spanning artificial intelligence (AI), robotics, manufacturing, energy, and space infrastructure.

“Operational integration between the two entities is already deep,” said JPMorgan analysts, while citing shared engineering talent, AI infrastructure, Terafab and Musk’s leadership as factors that “would facilitate an eventual combination.”

SpaceX President and Chief Operating Officer Gwynne Shotwell has also acknowledged potential benefits of the tie-up between the companies. During a June 2026 interview with CNBC, she said that folding the companies together “might ⁠make Elon’s life a little easier by streamlining management across his businesses.”

However, JPMorgan, in the same analysis note, also pointed to the “practical bottleneck” of getting regulatory approvals for both companies. Also, Musk controls a much larger voting stake in SpaceX than in Tesla, complicating governance considerations for Tesla’s public shareholders.

The post SpaceX, Tesla to invest USD 16.8 billion in Terafab project amid merger rumours appeared first on International Finance.

What the numbers said
The top line was the best Tesla has ever printed. Revenue reached USD 28.24 billion, up 26% on the same quarter a year earlier and ahead of the USD 25.71 billion analysts polled by LSEG had expected, while the core automotive segment brought in USD 20.52 billion, a rise of 23%.

Deliveries hit a record 480,126 vehicles, up 25% year on year, and energy storage deployments reached 13.5 GWh.

Everything below that line moved the other way. Operating income fell 57% to USD 398 million and operating margin sank to 1.4%, down from 4.1% a year earlier, as operating expenses jumped 47% to USD 4.35 billion.

Gross margin slipped to 16.8%, hurt by lower vehicle pricing and a sharp fall in regulatory credit income, a line that once delivered profit without effort.

Adjusted earnings came in at USD 0.33 per share. The size of the miss depends on whose consensus you use. LSEG had USD 0.51. FactSet had USD 0.55. Either way it was a substantial shortfall against a record revenue quarter.

Shares fell around 3% in after-hours trading on Wednesday. The heavier move came in Thursday’s session, when the stock dropped more than 12% and shed over USD 140 billion in market value, with the slide deepening during the earnings call itself.

Why the cash turned negative
The figure that unsettled investors most was free cash flow. Operating cash flow actually rose 85% to USD 4.70 billion, a healthy result. But capital expenditure surged 142% to USD 5.79 billion, producing negative free cash flow of USD 1.09 billion. That compares with positive free cash flow of USD 1.44 billion in the first quarter of 2026 and USD 146 million a year earlier.

It is worth correcting a figure circulating in some coverage. Several outlets have described a USD 3.3 billion cash burn. That number is the sequential increase in capital expenditure, not the cash deficit. The free cash flow shortfall was just over USD 1 billion.

So this is not a demand problem or a manufacturing problem. Tesla is generating more cash from operations than at any comparable point. It is spending faster than it earns, deliberately.

The company has raised its 2026 capital expenditure guidance to more than USD 25 billion, close to three times what it spent in 2025, with the money going towards AI infrastructure, robotics and the Optimus humanoid programme.

Chief financial officer Vaibhav Taneja confirmed the figure on the call, and Musk described 2026 as “a massive capex year,” arguing the investments would deliver strong returns. Musk also indicated capital spending would keep rising over the next two to three years.

A profit worth examining
Tesla reported GAAP net income of USD 1.11 billion, down 5% year on year. Here a caveat is needed. One outlet has reported that roughly USD 750 million of that figure came from a mark-to-market gain on Tesla’s stake in SpaceX, which would mean most of the quarter’s reported profit was a paper gain on a private company Musk controls rather than money earned selling cars or energy.

That claim comes from a single source and has not yet been corroborated against Tesla’s quarterly filing. If it holds, it materially changes how the quarter reads, because operating income was USD 398 million. Anyone relying on the point should check the 10-Q before treating it as settled.

Can the car business carry it?
There are real reasons for optimism on the automotive side. Analysts point to the fully ramped new Model Y, aggressive global pricing, the end of Musk’s DOGE role removing a reputational drag, and what one investor called the end of the EV slump that began in March 2024.

Full Self-Driving subscriptions are also becoming a visible recurring revenue line, though the specific figures cited on the call have so far appeared only in secondary summaries rather than in Tesla’s own materials.

Against that, the margin structure has changed. Tesla operated above 17% margins at the peak of its pricing power in 2022. It is now at 1.4%. The regulatory credit windfall that once flattered results has largely gone.

A business selling more cars than ever at thinner margins, while its subsidy income evaporates, is a weaker platform for funding multi-year moonshots than the same business two years ago.

The robotaxi question
This is where the gap between narrative and delivery matters most. Musk said last year that Tesla would scale its self-driving taxi service rapidly and launch in several US cities by the end of 2025, a target conditioned on regulatory approvals. Progress has been slower than that framing implied, and on Wednesday’s call the executive team took a noticeably more guarded tone.

Tesla now says Robotaxi is live in seven major metros, with several ramping unsupervised and San Francisco running supervised Full Self-Driving under a California permit. Cybercab production and public-road engineering tests began during the quarter, though the company describes these as steps before fleet deployment rather than deployment itself.

The mileage data supports two readings. Cumulative paid Robotaxi miles passed 2.4 million, up roughly 41% on the first quarter, and Tesla added Miami, Orlando and Tampa to its ramping-unsupervised markets, doubling active markets in a quarter.

Broken into quarterly increments, however, the service added roughly 900,000 paid miles in the second quarter, the same as in the first, meaning the quarterly rate held flat rather than accelerating. Both descriptions are accurate. Which one matters depends on whether you are measuring footprint or throughput.

Tesla says it recorded no notable incidents across more than 380,000 unsupervised miles. That is the company’s own figure and has not been independently audited.

On scale, the comparison remains stark. Independent trackers compiling operator disclosures and state filings put Waymo at roughly 3,000 vehicles across 11 US metros, around 500,000 paid rides a week and about four million autonomous miles weekly, while Tesla’s active Austin fleet is reported at around 20 vehicles despite unsupervised service covering the whole metro since June. Tesla’s robotaxi operation remains at an early stage and has yet to generate meaningful revenue.

Optimus, chips and the widening bet
The spending extends well beyond robotaxis. Tesla is pursuing Terafab, a chip manufacturing project shared with SpaceX and xAI, which Musk described as a dependency for Optimus.

The first Optimus production line is under construction, with mass production expected during 2026, though Musk conceded it is the hardest product Tesla has ever attempted to manufacture at scale, with almost every component requiring fresh development and a long capacity ramp ahead.

Tesla also more than doubled its onsite compute in Texas during the first half of 2026, with its Cortex clusters running above 90 MW and 115 MW.

None of these programmes is close to self-funding, and each carries an uncertain payoff date.

The cushion, and its limits
Tesla is not in financial distress, and it is important to say so plainly. It ended the quarter with USD 43.52 billion in cash, cash equivalents and short-term investments, up 18% year on year, with the sequential decline of USD 1.2 billion driven by the capex surge.

The quarter’s cash burn was also far smaller than analysts had feared, coming in at USD 1.09 billion against estimates closer to USD 3.64 billion.

A company with more than USD 43 billion in liquid assets and positive operating cash flow can sustain a USD 25 billion spending year without existential risk. The question is not solvency. It is duration and discipline.

The verdict
Tesla can afford this year. Whether it can afford three or four consecutive years like it, while margins sit near 1% and robotaxi throughput holds flat, is genuinely open.

The bear case is straightforward. The automotive engine is running at its thinnest margins in years, the subsidy income has shrunk, and spending is rising rather than plateauing.

The bull case is equally coherent. Record deliveries, growing subscription revenue, a strong balance sheet and a technological bet that, if it lands, reprices the entire company.

Musk spent much of the call describing Tesla as increasingly intertwined with SpaceX and xAI, citing Grok in the vehicles and Starlink in the Cybercab. Asked directly about a merger, he said there is “more and more overlap” between the companies but declined to discuss combinations on an earnings call.

That may be the most revealing signal of all. If the automotive business cannot indefinitely fund Musk’s AI ambitions alone, a restructuring that pools the capital of his empire starts to look less like speculation and more like a plan.

The post Can Tesla afford its robot dreams? What the Q2 numbers really show appeared first on International Finance.

Blume is battling to streamline Europe’s biggest carmaker, whose profits have slumped as it faces billions of euros in tariff costs, stiff Chinese competition, and pressure on its domestic manufacturing network to become more efficient.

Volkswagen has ⁠already agreed to cut 50,000 jobs across the group, including its Porsche and Audi subsidiaries.

“The company must work on reducing costs further, having calculated a cost disadvantage versus comparable companies of 20%. This means a theoretical deduction of another 50,000 jobs worldwide. We are currently assessing across all brands, companies, and regions how many adjustments are actually necessary and feasible,” Blume said in the memo seen by Reuters.

The organizational restructuring plan has faced angry reactions from workers. As per the reports, during the last board meeting on July 9, labor representatives on the committee blocked the proposals, which, apart from job cuts, also pitched for the closure of four factories.

However, Blume has sounded undeterred in the latest memo, as he mentioned, “As of today, we still cannot confirm competitive use cases for the plants of Emden, Hanover, Zwickau, and Neckarsulm in the 2030s.” But he is now preferring “intelligent solutions” over ⁠closures, having pointed to the defense industry or the production of Chinese Volkswagen models in Europe as options for underutilized factories.

The ⁠company will further reduce its production capacity and gradually halve its model lineups—measures that analysts have still found inadequate for solving Volkswagen’s current woes.

“Of course, it’s understandable that not everything has been planned ⁠out down to the last detail yet and that certain issues still need to be further discussed and evaluated. There will certainly be more meetings in which we will work hard to find the best solutions,” Blume said.

As per the German business magazine Capital, the state of Lower Saxony is considering ‌taking a stake in Volkswagen’s Osnabrueck plant, a move through which the provincial administration hopes to support the plant’s transition from automotive to defense production. Volkswagen sees the transition method as the viable one for other plants, whose ‌future ⁠is under discussion.

Volkswagen has been in talks with defense companies, including Israel’s Rafael, over future prospects ⁠for Osnabrueck, where production is currently scheduled to end in 2027. To complicate things further, Volkswagen has posted an 8.6% drop in deliveries in the ⁠second quarter, the steepest fall in the automaker’s history in the last four years.

Post the board meeting, Volkswagen made no mention of job cuts or plant closures. Instead, it reiterated largely known targets to reduce complexity, measures that did not require supervisory board approval.

The model range, which spans roughly 150 lines across brands including Audi, Porsche, Skoda, and Cupra, would be gradually trimmed in the pursuit of focusing on the “most attractive market segments.” Production capacity will be reduced to nine million vehicles a year, down from 10 million currently and well below a pre-pandemic target of 12 million. So-called offering complexity, including equipment options, will be cut by up to 75%.

Germany’s largest industrial union, IG Metall, has been rallying workers at Volkswagen Group sites across Germany, urging management to present a strategy that safeguards production. While Volkswagen’s current labor agreement includes a truce against organized strikes, unions are now threatening to step up industrial action if management seeks to reopen commitments on job security.

However, the silver lining here has been both sides agreeing to the challenges the group is facing, including a severe reduction of profit margins, weakness in China, ⁠and the costs of electrification and tariffs. Reiterating that the global situation for the carmaker has been a deteriorating one over the past twelve months, Blume wants the company to become faster, more resilient, and more competitive.

Data seen by Reuters shows Volkswagen’s German plants operating at 81% of standard capacity in 2026, a figure expected to fall to 73% by the end of the decade. Zwickau, among the sites earmarked for possible closure, will likely see utilization drop from 88% this year to 42% by 2030.

Henning Gebhardt, a fund manager at HollyHedge Consult, said Volkswagen faced a “perfect storm” of weak Chinese profitability, tariffs, and stronger rival offerings, compounding pressure across the wider auto industry.

The post Volkswagen CEO doubles down on job cuts, weighs ‘intelligent’ plant overhaul appeared first on International Finance.

What went wrong with the Luce
The Ferrari Luce sparked investor concern and social media backlash over its unconventional styling, with shares falling 8.4% after the May 25 unveiling. The car is priced at approximately 550,000 euro (roughly USD 640,000). The criticism was not really about the powertrain. Critics focused on design, emotion and brand heritage, feeling the minimalist, Jony Ive-influenced aesthetic departed too radically from what a Ferrari is supposed to look and feel like.

One widely read review put it more bluntly, noting that the backlash focused less on the fact that it’s electric than on the fact that it doesn’t look like the low-slung Ferrari many people expected, adding that strip away the badges and most people would not recognise it as a Ferrari at all. Adding to the identity crisis, the Luce is technically a four-door liftback rather than a sports car or supercar in the traditional sense, which for a marque built on two-seat theatre is not a small detail.

Rival reactions sharpened the point. Lamborghini’s chief executive Stephan Winkelmann defended his company’s decision to delay its own EV plans in favour of plug-in hybrids, calling it the right approach and effectively arguing that buyers were not yet ready. For a segment sold almost entirely on emotion, that is a serious warning.

The Manuale as the fix
Ferrari’s response arrived fast. On 3rd July it unveiled the 12Cilindri Manuale, a special series limited to 1,499 units, built with an open-gate six-speed manual by-wire system and a clutch pedal in the footwell, alongside a Tailor Made specification inspired by the 1968 365 GTB4. Under the bonnet sits a naturally aspirated 6.5 litre V12 producing 830 cv and revving to 9,500rpm, capable of 0-100 km/h in around three seconds and a top speed above 340 km/h.

It is the first new Ferrari fitted with a real clutch pedal and gated shifter since the 599 GTB Fiorano ended production in 2012, a fourteen-year gap. Pricing starts from 590,000 euro in Italy, with first deliveries scheduled for the Q1 2027.

It is worth noting the gearbox is not mechanically connected to the wheels at all. Two sensors read the position of the shift lever and clutch pedal, with an electronic controller translating those inputs into hydraulic commands sent to the standard eight-speed dual-clutch transmission. It is theatre engineered to feel authentic, not a return to old hardware.

Ferrari insists the timing is coincidental rather than reactive. The Manuale has been two years in development, and the company has said it will not ask clients who want its special cars to buy a Luce as a condition. Whether or not the timing was deliberate, the messaging lands as pure reassurance for the traditionalist end of its client base.

A business plan already hedging its bets
This tension was baked into Ferrari’s own strategy well before the Luce arrived. At its Capital Markets Day in October 2025, Ferrari cut its 2030 fully electric target to just 20% of the lineup, down from the 40% it had promised in 2022, with combustion and hybrid models splitting the remaining 80% evenly.

The market punished the retreat rather than rewarding the caution. Shares fell as much as 16%, their steepest single-day drop since the company’s 2016 listing, wiping out around 13.5 billion euro in market value.

Investors had been promised aggressive electrification and growth, and got a slower, more conservative version of both instead. On the product side, Ferrari committed to an average of four new launches per year through to 2030, so the Luce and the Manuale are early data points in a much longer experiment, not the whole story.

Is traditionalism actually holding Ferrari back
There is a reasonable case that it is. Chinese EV makers are already producing four-figure horsepower electric performance cars at a fraction of Ferrari’s price, and regulatory pressure on combustion engines across Europe is not going away.

A brand that keeps reaching for the V12 every time a new idea meets resistance risks training its own customers to reject anything unfamiliar, which makes each future launch harder rather than easier. The Luce’s design missteps were real, but retreating to nostalgia every time does not fix a design problem, it just avoids the next one.

The counter case is just as strong. Ferrari’s entire business is built on selling scarcity to people who already have everything, and the company’s own stated philosophy is to sell one car fewer than the market demands.

That model rewards patience over speed. Unlike a mass-market EV maker, Ferrari does not need to win over the whole market at once. It needs to convince maybe a few thousand people a year, and those buyers are demonstrably not there yet for a four-door electric liftback, whatever its horsepower figure.

Why some unconventionality still makes sense
None of this means Ferrari should stop pushing. Its cash generation from V12 and hybrid sales gives it room to experiment that most manufacturers do not have, and a flop like the Luce is survivable precisely because the ICE and hybrid business is throwing off enough profit to absorb it.

The smarter reading of events is not that Ferrari abandoned its next-generation ambitions for the Manuale, but that it is learning, expensively, which kind of unconventional its buyers will tolerate. Bold styling that breaks with sixty years of proportion was a bridge too far. A gearbox that fakes mechanical feel through software, oddly, was not.

The bigger picture
Ferrari is not choosing between tradition and progress so much as trying to sell both at once, to two different sets of customers who may never fully overlap.

That is a harder trick to pull off than either extreme, and the coming years of its 2030 plan will show whether Maranello can keep threading that needle, or whether it ends up known as the brand that flinched the moment its own fans pushed back.

The post Ferrari’s manual gearbox gambit: Is nostalgia papering over a bigger problem appeared first on International Finance.

All the eyes will be on Volkswagen CEO Oliver Blume, with the latter facing perhaps the biggest test of his leadership this week: persuading the German carmaker’s supervisory board to accept painful job cuts and factory closures as it struggles to fend off Chinese rivals.

Members of the board will meet at the company’s headquarters in Wolfsburg on ‌July 9 to discuss what could be the most far-reaching structural overhaul in the history of the world’s second-largest automaker.

When Blume announced plans to shutter up to four German factories and expand job cuts to a staggering 100,000 workers, the initial shock quickly gave way to a more layered question. Could the company actually do it? The answer lies in a singular piece of legislation that has shaped the German automaker’s identity for more than six decades.

The “Volkswagen Law,” as it is known, is a governance architecture unlike anything else in global corporate history, one that simultaneously protects workers, complicates investors, and frustrates those who believe shareholder capitalism should be allowed to operate without political interference.

Blume’s radical organizational shake-up plan faces strong opposition from workers’ unions and key shareholders. They have the power to block it, complicating things for the CEO who is already fighting a massive battle against headwinds like intense competition from Chinese rivals, shrinking margins, and stiff import tariffs from the United States.

A make-or-break scenario of Blume
Blume’s plans include significant ⁠cost reductions, plant closures, and roughly 50,000 extra job cuts, exceeding the scale of a restructuring agreed upon around 2024. In fact, the new tally of 50,000 will add up to 50,000 that are currently planned for the whole group.

Blume, as per the analysts, has no other option but to deliver fundamental changes at Europe’s biggest automaker by sales, whose shares are trading near 16-year lows.

The 2024 Volkswagen restructuring, which included cutting 35,000 jobs by 2030, was a result of the tough negotiations between the CEO and the powerful unions, with the latter extracting massive concessions like the automaker backing off from decisions like factory closures and compulsory layoffs until the end of the decade. However, those options have made their way back again in 2026.

Volkswagen’s largest investor, Porsche, has been bruised by tens of billions of euros of writedowns on its core investment to overhaul the group’s business model, saying cost cuts alone are not enough. If the CEO again concedes to the unions, the board may not take it positively.

Unions, on the other hand, are likely to maintain the 2024-like tough stance, especially on matters like layoffs and plant closures. They hold no equity but wield significant influence on strategic matters via the supervisory board.

Blume’s predecessors Herbert Diess and Bernd Pischetsrieder had to resign from the automaker, for clashing with unions. The current CEO is a reputed consensus-seeker who has reportedly been able to balance all of Volkswagen’s stakeholders, including the Porsche and Piech families, unions, Qatar, and the German state of Lower Saxony.

Things have changed drastically at the Volkswagen board, with the sudden departure of shareholder representative ⁠Susanne Wiegand, leaving labor representatives with 10 of the board’s 19 seats. Chairman Hans Dieter Poetsch won’t be able to cast his decisive vote in case of a stalemate between the shareholder and labor representatives on the board.

Hendrik Schmidt of DWS, among the 10 biggest shareholders, called for a ⁠more critical look at the automaker’s array of brands. Throwing his support behind Blume, he said the CEO was being bogged down fighting crises rather than shaping the company’s future. In fact, as per Hendrik, a change of leadership would only cause further unrest.

Powerful Unions: Legacy Rooted in Dark History
To understand the law, one must go back further than 1960. The strong influence of workers at Volkswagen dates to the early days of the company before World War Two, when the Nazis built Volkswagen’s main factory in Wolfsburg with money that came in part from assets expropriated from trade unions, and the use of forced labor formed the financial basis of the company. After the war, the British, who were responsible for the plant at the time, decided to place trusteeship of the company in public hands.

That post-war settlement carried enormous moral weight. In 1960, when the Federal Republic of Germany decided to privatize the company and transform it into a joint-stock corporation, the so-called “Volkswagen Law” got passed, handing significant influence to Lower Saxony and workers to protect the business from outside influence.

The law changed the company to a joint stock corporation, with 20% held each by Germany and Lower Saxony, the region in which Volkswagen is still headquartered. By limiting the share of any other stockholder to 20%, regardless of how many shares owned, the law effectively protected the company from any attempt at a hostile takeover.

It was, in essence, a deliberate act of social engineering, embedding labor rights into the legal DNA of Europe’s largest car manufacturer at a time when Germany was still rebuilding its industrial and democratic institutions.

How the Law Actually Works
The Volkswagen Law operates through two principal mechanisms that together create a fortress around worker and state influence. Decisions that normally require at least a three-quarters majority at the annual general meeting must be passed by more than four-fifths of Volkswagen shareholders, giving Lower Saxony a blocking minority. Any decision to build or move a production plant also needs approval of a two-thirds majority in the 20-strong supervisory board, without specifically mentioning closures. This means the 10 members on the board representing German labor can veto any far-reaching plans that affect factories.

The ownership structure that underpins this arrangement is unusually layered. The German state of Lower Saxony owns 11.8% of shares, while Qatar holds 10%. When it comes to voting stakes, however, the picture changes, with a 53.3% voting stake, Porsche SE holding a majority; Lower Saxony has 20% of votes and Qatar 17%. This divergence between economic ownership and voting power is itself a source of persistent investor frustration.

Compounding matters further, there are two different classes of Volkswagen shares. There is one preferred stock that is listed in the German benchmark DAX index and a common stock that carries voting rights. The result is a corporation where financial exposure and decision-making authority are deliberately misaligned, by design and by law.

A Law Tested, Challenged, and Revised
The “Volkswagen Law” has not survived unchallenged. Its most consequential legal test came in 2007, when the European Commission’s long-running campaign against it finally reached the EU’s highest court. In October 2007, the European Court of Justice ruled that the VW Law was illegal because of its protectionist nature. At that time, the Porsche holding held 30.9% of VW Group shares, and there had been speculation that Porsche SE would be interested in buying all shares if the law did not stand in its way. The Court also prevented the government from appointing Volkswagen board members.

Germany did not capitulate. In 2008, the German government rewrote the Volkswagen Law, attempting to sidestep the ECJ judgment by removing restrictions on share ownership but still requiring an 80% majority for important decisions, so Lower Saxony would still be able to block major business decisions and takeovers.

Brussels took Germany back to court, seeking daily fines. In October 2013, the EU Court of Justice ruled that the redraft of the Volkswagen Law “complied in full” with Union law, bringing the matter to a close.

The episode illustrated the tenacity with which both sides held their positions. It also had an unintended consequence noted by legal scholars. Soon after the decision, which removed shareholder control from the State of Lower Saxony, the management practices leading to the Volkswagen emissions scandal began. In 2015, it was revealed that Volkswagen management had systematically deceived US, EU and other authorities about the level of toxic emissions from diesel exhaust engines.

The observation, though correlational, has since informed arguments that governance protections for non-shareholder stakeholders carry systemic value. The law’s provisions also proved decisive in the 2024 confrontation involving Blume and the unions. Labor representatives, supported by the legal structure, blocked plant closures under a 2024 deal, reflecting how governance rules continue to influence Volkswagen’s restructuring amid the 100,000 job-cut plans announced in June 2026.

The talks that produced that deal were extraordinary by any measure. The agreement came after 70 hours of negotiations, five rounds of talks, and two major strikes involving 100,000 workers, marking the largest labor action in the automaker’s history.

Under the new agreement, no site was to be closed, no one made compulsorily redundant, and the in-house wage agreement was secured in the long term, though 35,000 jobs would be cut by 2030 and production capacity in Germany reduced by more than 700,000 vehicles.

Why Investors Remain Unhappy
For institutional investors, the Volkswagen Law and the broader governance structure it anchors represent a persistent drag on value creation. The argument is that Volkswagen and unions have half the seats on the supervisory board and, with the help of politicians in its home state and shareholder Lower Saxony, a virtual veto on company policy, implying that the company remains worker-centric rather than shareholder-friendly.

The financial consequences are tangible. The resulting valuation discount has caused Volkswagen’s shares to underperform the sector over the past five years, with uncertainty over succession at the Porsche and Piech families adding to investors’ wariness. By mid-2026, Volkswagen’s shares were trading near 16-year lows, a humbling position for the world’s largest automaker by production volume.

Leading institutional voices have grown more assertive. German asset manager Deka has flagged the risk of a “gradual decline,” warning that inaction or half-measures could see the automaker lose ground to both traditional rivals and new entrants at a time when the industry is undergoing rapid consolidation and technological change. The intervention underscores how corporate governance and shareholder engagement have become more assertive at large European industrial groups, especially when long-term competitiveness is in question.

The criticism extends beyond factory closures. Volkswagen has been criticized by investors for governance shortcomings partly related to its ownership structure, which gives Porsche SE great control over the company even though it does not own a majority of all shares. CEO Oliver Blume gave up his Porsche AG post at the beginning of this year after years of criticism from some shareholders over his dual role as head of two large and related auto groups.

The investor case, put plainly, is that the law prevents Volkswagen from making hard but necessary decisions at the speed that competitive markets demand. Every restructuring negotiation becomes a prolonged political process, every factory rationalization a national drama.

A Different World Outside Germany
The Volkswagen Law looks even more exceptional when compared with how auto workers elsewhere negotiate with management. In the United States, the United Auto Workers union operates through collective bargaining that gives it significant leverage on wages, benefits, and working conditions but stops well short of structural board representation. In Germany, mass layoffs and the introduction of new technologies in a workplace require works council approval, and half the members of VW’s supervisory board are employee representatives, while in Europe, this degree of co-determination is termed “quite minimal” when compared with what exists at VW’s own German facilities.

The contrast was starkly illustrated by VW’s own American plant. The UAW attempted unsuccessfully to unionize the Chattanooga plant in 2014, defeated in a 712 versus 626 vote, even though the unionization effort was backed by Volkswagen management and IG Metall in Germany.

The irony of a company actively supporting unionization at its own facility, only for workers to vote it down amid external political pressure, underscored how fundamentally different the cultural and legal landscape for labor relations is across the Atlantic.

In Japan, enterprise-level unions at companies like Toyota maintain high density and strong management relationships but operate through cooperative consultation rather than statutory co-determination. The Japanese Automobile Workers Union has deployed its influence to support organizing efforts globally, including supporting organizing drives of the UAW at Nissan’s plant in Mississippi and Unifor’s efforts at Toyota in Canada, but Japan’s model lacks the legislative teeth that give German workers a formal veto on the corporate strategy.

China’s situation is more constrained. Independent unions in China are banned, with the All-China Federation of Trade Unions being the only permitted one. Though 80% of VW China’s 23,000 employees are unionized, the model includes a works council structure that operates within state-sanctioned limits rather than genuine independent bargaining power.

What the comparison reveals is that Germany’s co-determination model, of which the Volkswagen Law is the most extreme and legally formalised expression, sits at the far end of a global spectrum. Nowhere else do production workers hold statutory veto power over plant-level decisions at one of the world’s largest manufacturers.

Image Credit: Volkswagen

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The route, the numbers, the moment
The inaugural service connects Abu Dhabi and Fujairah with a journey time of one hour and 45 minutes, a dramatic cut from the roughly two and a half hours the same trip takes by road. The very first train departed Fujairah at 5.34 am, with passengers welcomed at the station with traditional Emirati dance and Arabic coffee, and arrived in Abu Dhabi seven minutes ahead of schedule. His Highness Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, inaugurated the Mohamed bin Zayed City Passenger Train Station in the capital as part of the launch.

Sheikh Theyab bin Mohamed bin Zayed Al Nahyan, Chairman of Etihad Rail, called the network a defining moment for the country’s transport ecosystem, one built on modern technology to deliver a safe and efficient mobility system. The framing matters. This is not being pitched merely as a convenience for commuters, but as a structural piece of how the UAE wants to be seen, connected, efficient and diversifying beyond oil and aviation.

What the fleet and stations look like
The passenger fleet consists of 13 trains manufactured by the Spanish firm CAF, capable of speeds up to 200km/h and each carrying up to 400 passengers. Fujairah Station, the first to be fully completed in the network, sits within Hilal City, close to the emirate’s key economic hubs and roughly 12 minutes from Fujairah International Airport, with parking and ride hailing pick up points built in. Inside, elevators and escalators serve the platforms, alongside a premium lounge, a help desk, a police hub and real time timetable screens. Abu Dhabi Station in Mohamed Bin Zayed City will operate daily from 5 am to 11 pm, and amenities across stations include prayer rooms, family waiting areas, retail outlets and food and beverage counters.

Tickets, classes and how to book
Fares on the Abu Dhabi to Fujairah route start from Dh55 in Comfort Class and Dh120 in Premium Class, though this reflects a launch period discount of roughly half the regular Dh109 and Dh239 pricing. Within Comfort Class, travellers can choose between Standard, Value and Flex tiers, with the Flex option costing an additional Dh20, offering seat selection and a refundable booking, while the base Standard ticket has automatically assigned seating and no refunds. Children up to 17 travel at Dh28 in Comfort and Dh60 in Premium under the discount, seniors aged 60 and above pay Dh44 and Dh96 respectively, and infants under two travel free on an adult’s lap. Wheelchair users are charged standard adult or child fares, with designated spaces and priority seating subject to availability.

Bookings opened through the Etihad Rail app and website from 23rd June, and uptake has been swift. More than 10,000 tickets were sold in the week following the opening of bookings. Up to six services a day are expected to run between Abu Dhabi’s Mohamed Bin Zayed City station and Fujairah’s Al Hilal City station, spread across morning, afternoon and evening slots.

What the ride actually feels like
This is the part most likely to draw curious first time riders. Premium Class seats recline at the touch of a button and come with generous legroom, while both classes get USB and USB C charging points at every seat along with complimentary Wi-Fi. Retractable tray tables, overhead and under seat luggage storage, wall mounted hooks for bags, and dedicated seating for families and pregnant women feature across the cabins. Etihad Rail has been candid that for many residents, this will be their first experience of rail travel altogether, and station design has been shaped around that, with clear signage and staff on hand to guide first timers.

Interestingly, the cabin interiors also carry a distinctly national touch, featuring portraits of the UAE president and his sons woven into the contemporary design, a small but deliberate detail that ties the infrastructure project to the country’s broader identity building exercise.

The rollout still to come
The Abu Dhabi to Fujairah link is only the opening move. Dubai and Al Dhaid stations open on 30 September, followed by stations across the Al Dhafra region on 30 December, and the initial route will be completed when Sharjah station opens on 30 March 2027. Beyond that, feasibility studies are being conducted to evaluate expanding passenger rail into the remaining emirates and regions of the country. Once complete, the network will connect ten cities stretching from Al Sila in the west to Fujairah in the east, and Abu Dhabi to Dubai is projected to take under an hour, with Dubai to Fujairah around 69 minutes. A separate high speed line between Abu Dhabi and Dubai, expected to eventually cut that leg to just 30 minutes, is also part of the longer term plan.

There is a luxury dimension too. Etihad Rail has signed a deal with the Italian hospitality group Arsenale to develop a premium train experience, one that has drawn comparisons in spirit to the Orient Express, aimed squarely at the tourism market rather than daily commuters.

Why this matters beyond the timetable
The launch arrives less than five years after the UAE first announced its National Railway Programme as part of the “Projects of the 50” initiative in 2021, a pace officials are keen to highlight as proof the country can deliver large infrastructure ahead of schedule. Beyond the novelty factor, the economic logic is straightforward. Faster, cheaper intercity movement lowers the cost of doing business across emirates, opens northern emirates like Fujairah to a wider tourism catchment, and reduces reliance on congested highways. Once the network is fully operational, Etihad Rail expects to carry up to 10 million passengers a year, a figure that would meaningfully reshape domestic travel patterns in a country long defined by private car use.

For now, the practical takeaway for travellers is simple. The Abu Dhabi to Fujairah corridor is open, tickets are discounted for the launch window, and three more legs of the network arrive over the next nine months. Anyone curious about experiencing it first hand will not need to wait long to see the rest of the map fill in.

Image Credit: Etihad Website

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The numbers are striking. Transport systems in the region could see between 10 and 50 extra days a year above 25°C, with some areas facing up to 200 such days annually. That kind of heat damages road surfaces, warps bridge joints and even bends rail tracks. Flooding is an even bigger threat, accounting for roughly 73% of expected annual damage worldwide, with about 7.5% of all transport assets exposed to a “1 in 100 years” flood event.

The report also points to the huge financial cost of extreme weather already being felt. The 2024 Atlantic hurricane season alone caused an estimated USD 232 billion in damage, and ports worldwide face around USD 7.5 billion in losses every year from storms and flooding.

Four major risks stand out. Heavier rainfall threatens river basins around Europe’s Danube, Rhine, Elbe and Volga, raising the odds of landslides and washed-out roads. Rising heat could bring an extra 10 days above 25°C a year to 90% of Europe’s rail network by 2050-2080, risking rail deformation and signal failures. Melting snow, ice and thawing permafrost could put 70% of Arctic infrastructure at risk by 2050, though early action could halve the cost of fixing it. And rising seas could leave 71% to 89% of the world’s ports vulnerable to extreme storms by 2100, with around five million Europeans facing near-annual coastal flooding by then.

UNECE Executive Secretary Tatiana Molcean said transport systems are essential to how societies and economies function and that disruptions carry heavy human and financial costs. She stressed that adapting infrastructure to climate risk is no longer optional, since extreme weather is already a present-day reality rather than a distant threat.

The report highlights examples of countries already adapting. Portugal has built flood- and wildfire-resilient measures into a new bus network, France is preparing its road and rail systems for a 3°C temperature rise, Germany is mapping landslide risks after a rockfall shut a key freight line for seven weeks, and Denmark is using sensors to detect unstable rail embankments before they fail.

The report argues the payoff is clear. Citing the World Resources Institute, it notes that every dollar spent on climate adaptation can generate more than ten dollars in economic and social benefits. UNECE is now setting up a new “Technical Body on Inland Transport Climate Resilience”, due to hold its first meeting in November 2026, to carry this work forward.

Image Credit: UNECE

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Members of Volkswagen’s supervisory board have been briefed on the plans, due to be discussed at a board meeting on July 9. The proposed closures at Hanover, Zwickau, and Emden, along with Audi’s Neckarsulm site, would put more than 45,000 jobs at risk, on top of 50,000 cuts already agreed with unions in late 2024. The brutal layoff of 100,000 people, along with the shutdown of four assembly plants, will be the largest restructuring in the automotive industry’s history, according to people familiar with the matter and a report by Manager Magazin.

The shake-up will be as massive as the one conducted by General Motors (GM) during its ⁠2009 bankruptcy and in the early 1990s, when the American automaker cut as many as 74,000 jobs and shut or idled 21 plants.

CEO Oliver Blume presented the plans to senior executives this week as he tries to align management behind cuts likely to face fierce resistance from unions and the state of Lower Saxony, Volkswagen’s second-largest shareholder. Blume and Chief Financial Officer Arno Antlitz are also said to be planning a broader restructuring, including spinning off the core VW brand and parts operations into separate entities.

Blume and Chief Financial Officer Arno Antlitz are reportedly aiming to fundamentally restructure the 89-year-old German giant, including spinning off the core VW brand and parts operations into separate entities, Manager Magazin added. The overhaul would also see planned investment cut by around 15%, to just over 130 billion euro (USD 148 billion), over the next five years.

Volkswagen’s works council and Germany’s IG Metall union vowed to resist any such measures, saying in a joint statement, “Should such plans go ahead, we would do everything in our power to prevent them.”

By the end of the 2025 financial year, the group’s overall headcount stood at 667,164, with almost 43% based in Germany. Blume’s overhaul-related plans will go against Volkswagen’s unique governance and ownership structure, which gives significant influence to labor union representatives. In 2024, when Blume wanted to close plants in Germany, he faced fierce resistance from labor unions that forced him to make a retreat.

While the management, back then, had the idea of shutting or selling ⁠several sites as part of a sweeping cost-cutting drive to tackle overcapacity and weak demand in its electric vehicle vertical, IG Metall and the works council conducted massive strikes in a prolonged standoff with the automaker’s management.

The pressure on Volkswagen stems largely from China, where non-Chinese automakers’ market share fell to 32% in 2025 from 57% in 2020, according to AlixPartners. Volkswagen, once China’s top-selling automaker, was overtaken by BYD in 2024 and slipped to third place last year. Premium rivals including BMW have also flagged weaker China sales.

Volkswagen shares have fallen more than 25% so far in 2026. Apart from tough Chinese competition, the carmaker is also tackling stiff tariffs on car imports into the United States as well as dwindling demand in Europe, which, as per the company, has made its business model unsustainable.

According to the management consulting firm AlixPartners, non-Chinese automakers’ market share in the world’s largest automobile market fell to 32% in 2025 from 57% in 2020. Having been China’s top automaker for years, Volkswagen got knocked into second place by BYD in 2024. In 2025, the automaker got relegated to third place. To make things worse, Chinese automakers are also expanding into emerging markets, apart from growing rapidly on Volkswagen’s home turf in Europe.

BYD, Chery, SAIC, and Leapmotor doubled their combined European market share through May from a year ago, according to ACEA (European Automobile Manufacturers’ Association).

As per Germany’s Bild newspaper, Volkswagen is also planning to end its automated driving tie-up with auto supplier Bosch to cut costs and ‌boost its competitiveness. The partnership was launched in 2022 with Volkswagen’s software unit Cariad to develop software for driver assistance and autonomous driving across the automaker’s brands.

Citing sources, Bild said the project had not met expectations after around 1.5 billion euro (USD 1.71 billion) had been invested in it.

“Internal assessments found the technology was not yet competitive. The Bosch tie-up is scheduled to be ended ⁠in accordance with the terms of the contract, and a final termination would not occur before Monday (29th June),” the newspaper added further.

“Volkswagen plans to source hardware and software for ⁠such systems from a new partner. A replacement is currently being chosen, with a contract planned by September,” Bild added further.

The automaker, pursuing its aggressive cost-cutting further, has agreed to sell its diesel engine unit, Everllence, to Bain Capital in a leveraged deal (in which a company is acquired ⁠largely with borrowed money), generating proceeds of about 7.4 billion euro (USD 8.4 billion).

“Leaner structures and processes will give Everllence the opportunity to achieve further growth in attractive markets such as data centers, the energy sector, and shipping. At the same time, it will allow us to focus even more strongly on our core business,” Blume said while announcing the move.

Bain, in the medium term, will remain Everllence’s major shareholder with a 49% stake, which, in the coming years, will rise to 51%. The venture was competing against CVC ‌and ⁠EQT in the bidding race, the latter of which was part of a consortium with Porsche SE and Qatar. It is worth mentioning that Porsche holds 53.3% of voting rights in Volkswagen, followed by the Gulf country (17% through its sovereign wealth fund).

Everllence, formerly known as MAN Energy Solutions, makes diesel engines for the shipping industry. The company has plans to cash in on the ongoing AI boom by meeting demand for generators to power data centers. As part of the deal with Bain, the company’s sites in Augsburg, Oberhausen, Berlin, Hamburg, and Ravensburg will be retained under the new ownership structure at least until the end of 2030.

Image Credit: Volkswagen Group

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