by Volkswagen Cuts Production by 1 Million Cars Due to Falling Sales
The Volkswagen company plans to reduce its global production capacity by another 1 million units per year. The reason is that sales cannot return to the level they were at before the COVID-19 pandemic. The cuts will affect European plants, with the VW and Audi brands being hit the hardest.
As of last year, the German conglomerate had the capacity to produce approximately 12 million cars but sold only 8.68 million. According to CEO Oliver Blume, “excess capacity is unsustainable for our company in the long term.” He added that “planning based on past volumes is unrealistic” in the current era.
“In Europe, we will also reduce this figure by approximately one million by 2028, primarily at Volkswagen and Audi,” Blume told Manager Magazin. “We are facing negative consequences amounting to tens of billions and have taken large-scale countermeasures. The focus is now on further lowering the break-even point to become more resilient in a risky environment.”
Changing Automotive Landscape
Before the pandemic, the VW Group regularly sold over 10 million cars per year and was approaching the 11 million mark in 2017, 2018, and 2019. Blume notes that 2019 was the last year when markets were predictable, and achieving 9 million units is now a solid result.
“Tariffs introduced in the US are affecting our profits and complicating access to an important future market,” he said. “Furthermore, more and more competitors are entering the market. Selling nine million cars under current conditions is a strong achievement.” Blume also pointed out how the war in the Middle East has affected the automotive industry, adding that “these events do not simply pass by.”
It is unclear which specific VW plants in Europe are at risk. Its electric vehicle plants in Emden and Zwickau are currently operating significantly below capacity, and Blume suggested that one of the brand’s European sites could be sold to a Chinese competitor. Overall, by 2030, VW’s cost and production reduction measures are expected to affect approximately 50,000 jobs in Germany.
Optimism About North America and the Scout Brand
Despite the gloomy news, Blume expressed optimism about production in North America and the new Scout brand.
“These [Scout] are great cars that fit perfectly into this market. Partnering with other companies would be a way for us to minimize risks,” he said. “We could share investments with other companies, and partners could, for example, use our platform. However, we have not yet made a decision on this. The enthusiasm and expectations for this brand are very high.”
The production cut of 1 million units is a serious signal of how global economic and geopolitical factors are affecting even the largest players in the automotive market. For Volkswagen, this is not just a temporary adjustment but a strategic restructuring that could lead to plant closures or sales, as well as significant job cuts in Europe. At the same time, the company is betting on new markets and brands, such as Scout in North America, trying to find new growth points. The sale of a plant to a Chinese competitor, if it happens, would be an unprecedented step that could change the balance of power in the European automotive industry.
