Volkswagen Might Make Even More Cost Cuts

Right before Christmas, Volkswagen reached an agreement with German unions to reduce its workforce by over 35,000 people by 2030 through a “socially responsible reduction” program. This drastic decision is part of a broader plan to cut costs in the company’s domestic market. Labor costs alone will be slashed by €1.5 billion annually, and total cost savings will amount to €15 billion annually in the medium term.

Despite radical decisions made after weeks of negotiations and factory strikes, more cost cuts are apparently necessary. Handelsblatt reports that the math still doesn’t work in VW’s favor. Sources familiar with the matter told the German business newspaper that “the cuts must be deeper.” VW declined to comment on the matter, but insiders claim the company has already delayed its profitability target by 3-4 years. It had intended to achieve a 6.5% margin by the end of 2026.

Earlier this month, Reuters reported that some Chinese automakers were interested in buying some of VW’s underused factories in Germany. Doing so would allow companies to dodge the EU’s tariffs, which came into effect in October 2024. These are shockingly high, reaching as much as 35.3% in the case of SAIC, the state-owned company that owns the “British” brand MG. Selling factories to Chinese companies would allow VW to improve its balance sheet quickly, but it would risk losing even more sales to cheaper EVs from up-and-coming brands. VW brand sales fell 1.4% last year to 4,796,900 cars.

This week, VW Group and Porsche CEO Oliver Blume admitted in an interview with Reuters that Chinese investors are interested in German plants. When asked whether selling factories is a real possibility, he didn’t rule it out. Still, he noted that a decision has yet to be made: “It is always positive when companies invest in Europe … we have close partnerships in China, and of course, there have been conversations, but no concrete decisions.”

VW has joint ventures with SAIC, FAW, and JAC in China, where a new and confusingly named AUDI brand intends to sell cars without the iconic Four Rings, separate from the regular Audi lineup.

The automotive juggernaut intended to close plants in Germany, but labor unions pressured VW to change its mind. The Osnabrück site faces an uncertain future once production of the T-Roc Convertible ends in mid-2027: “Options for a different use of the site are currently being explored.” Reuters alleges VW would be willing to sell the plant to a Chinese buyer.

The Dresden factory will stop making the ID.3 electric hatch by late 2025. What happens after that? “VW is working on alternative options. These include the possibility of VW participating in a third-party scheme.” The Transparent Factory was built in the early 2000s to assemble the Phaeton flagship. A second generation of the luxobarge was developed but subsequently canceled. The short-lived e-Golf was also built there.

Before any of this happens, the VW Group will soon shut down a plant. Audi’s Brussels site will end production of the Q8 E-Tron on February 28.