VW Considers More Cost Cuts To Turn Things Around

Volkswagen Group board members are worried that the company's development and competitiveness in the market won't be supported by the workforce reductions that were previously agreed upon by the end of 2024, according to a report published by Handelsblatt on Thursday that cited people with knowledge of the matter.
The sources say that the German automaker has revised its profitability target and now aims to achieve a 6.5% margin by 2029, instead of the initial goal of reaching it by the end of 2026. Additionally, the members suggest that further cost-cutting measures might be necessary to turn things around.


The automaker and German unions agreed in December of last year to implement a "socially responsible reduction" program that would scale down the company's staff by more than 35,000 employees by 2030 to reduce costs in the company's domestic market.

As Volkswagen pursues severe cost-cutting measures, Chinese automakers have entered into the equation. According to Reuters, major Chinese brands are interested in purchasing some of Volkswagen's underutilised German facilities, allowing them to circumvent the European Union's high tariffs on Chinese-made EVs, which can now reach 35.3% in some situations.

Volkswagen's joint ventures in China with SAIC, FAW, and JAC already place it among the most established European brands in the Chinese market. However, giving off German production locations to Chinese manufacturers risks undermining VW's dominance even further, allowing cheaper, tech-heavy EVs from names such as BYD, NIO, and XPeng to flood the European market at lower prices.

The company's challenges are primarily driven by the rapid growth of the global EV market. The German automaker is facing pressure from both cost-effective Chinese rivals and high-end EV competitors such as Tesla.

VW has already spent billions on electrification, but several models—most notably the new ID series of EVs—have been delayed due to production failures, supply chain concerns, and software glitches. Chinese EV manufacturers are simultaneously oversupplying the world market with highly sophisticated but notably less expensive models.