Volkswagen is facing a perfect storm: slowing demand for electric vehicles, crippling US tariffs, and cutthroat competition from Chinese manufacturers that have mastered the art of producing cars at a fraction of the cost. According to reports, the German automaker is mulling drastic job cuts of up to 100,000 employees by 2030 – one in six of its workforce – as it struggles to stay afloat in an increasingly hostile market.
Manager Magazin claims that Volkswagen's plans could involve scrapping production at key plants, including those in Hanover, Emden, and Zwickau, as well as Audi's Neckarsulm factory. The company is tight-lipped about the proposal, but has acknowledged the profound transformation gripping the automotive industry – and its own business model, which relies on developing cars in Germany, producing them in Europe, and exporting them globally, no longer cuts it.
With tariffs, competition, and stagnant markets exacting a toll of tens of billions of euros annually, Volkswagen is under pressure to slash costs and sharpen its focus. This restructuring follows hot on the heels of the company's decision to divest a majority stake in Everllence, its heavy-engine business, to Bain Capital for £6.38 billion – part of CEO Oliver Blume's strategy to streamline an expansive corporate structure.
The writing is on the wall: Volkswagen faces intense competition from Chinese rivals like BYD, Geely, SAIC, and Chery, which have rapidly gained traction in Europe with affordable electric vehicles. The company has already seen its market dominance eroded, having briefly lost its position as China's leading carmaker to BYD in 2024 – despite regaining the top spot earlier this year.
The long-term trend is grim for Volkswagen: Chinese domestic manufacturers are leading EV sales within China and expanding aggressively into European markets. Data from the European Automobile Manufacturers' Association reveals that Chinese brands doubled their market share in Europe in May compared to the previous year, underscoring the seismic shifts underway in the continent's automotive sector.
The company's restructuring also reflects its search for new growth avenues beyond traditional car manufacturing, including electric powertrains and mobility services. While it remains to be seen how Volkswagen will adapt to this new reality, one thing is clear: established European carmakers must innovate – or risk being left in the dust by their Chinese rivals.
ONS labour market data reveals that the UK automotive sector has already felt the pinch, with 14,000 job losses between January and May this year. As Volkswagen navigates its own restructuring, it will be watching closely to see how its European peers – including BMW, Mercedes-Benz, and Jaguar Land Rover – respond to the changing landscape.