Volkswagen may be on the brink of a significant transformation, which could mark the most substantial changes in the company’s 89-year existence. Reports indicate that the automotive giant is contemplating laying off up to 100,000 employees and closing four of its manufacturing plants as it grapples with increasing competition from Chinese electric vehicle manufacturers and evolving market dynamics.

According to information from Reuters, Volkswagen’s supervisory board has been briefed on proposals that include the shutdown of facilities in Hanover, Zwickau, Emden, and the Neckarsulm plant of Audi. These proposals are set to be deliberated at a significant board meeting scheduled for July 9. If the board endorses these plans, it could lead to over 45,000 additional job losses, which, combined with the 50,000 job reductions already negotiated with unions for late 2024, would result in a total of approximately 100,000 cuts.

Moreover, the company is reportedly considering decreasing its investment by around 15 per cent over the next five years. This decision could bring its projected spending down to just over 130 billion euros, further demonstrating the extent of the challenge Volkswagen faces in adapting to the current automotive landscape.

Challenges Facing Volkswagen

Chief Executive Oliver Blume is reportedly striving to rejuvenate Volkswagen’s position as the company encounters challenges across various fronts. Increasing tariffs, the costly transition to electric vehicles, and fierce competition from Chinese manufacturers have all contributed to the pressures on the company, particularly in its primary foreign market.

Volkswagen, which was once the leading carmaker in China, ceded that position to BYD in 2024 and is projected to fall to third place behind Geely in 2025. The rapid expansion of Chinese brands throughout Europe is intensifying the pressure on established carmakers, with industry data showing that companies such as BYD, Chery, SAIC, and Leapmotor have doubled their collective market share in Europe compared to the previous year.

This shift not only underscores the competitiveness of the electric vehicle market but also signals a potential threat to Volkswagen’s future in an industry increasingly dictated by technological advancements and consumer preferences.

Unions Prepare for Opposition

Volkswagen has not confirmed the reported plans for restructuring, merely stating that the entire organisation “must undergo far-reaching change.” The company’s influential works council alongside Germany’s IG Metall union has indicated a determination to resist any such proposals.

In a joint statement, both parties noted that if the plans are advanced, they would “do everything in our power to prevent them.” Given that Volkswagen employs more than 667,000 individuals globally, with nearly 43 per cent located in Germany, any decisions made regarding workforce reductions could significantly impact not just Volkswagen but the broader European automotive sector.

Investor sentiment appears cautious in light of the potential changes, with Volkswagen’s shares trading near 16-year lows. Concerns persist about whether such extensive restructuring could reverse the company’s recent downturn, adding another layer of uncertainty to the situation.

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