Volkswagen must intensify cost cutting to remain competitive as Chinese brands increase pressure both in the German automotive group’s domestic market and, more generally, in Europe. Commenting on a quarterly report with “mixed” results, CEO Oliver Blume highlighted ever-increasing risks in the face of growing rivals. He also emphasized the high number of active competitors in China and their progressive entry into the European market. The picture is further complicated by operational difficulties related to tariffs, weak Chinese demand, and the possible closure of some plants in Germany.
Volkswagen must intensify cost cutting
In the plan outlined by management, the proposal to double the already agreed staff cuts, reaching 100,000 units, stands out. But also the warning that four German plants could close after 2030. However, the restructuring was not fully approved during a supervisory board meeting at the beginning of the month, paving the way for new and more tense negotiations with the unions. Despite uncertainties about the political-industrial path, some analysts note signs of stabilization. In the second quarter, revenues were reportedly higher than forecasts, and the group is on track to improve its operating margin within the indicated range (4.0%-5.5%).
Chinese rivals are serious
The reported figures show an operating profit down 9.5% (to 3.5 billion euros), while the operating margin remains within target, standing at 4.2% for the quarter. For the current year, Volkswagen also revises downwards its revenue growth outlook, forecasting a decline of up to 3%. On the strategic front, Chinese competition seems to be shifting its focus towards a production presence in Europe: companies like BYD and Geely are targeting competitive-priced electric and plug-in hybrid vehicles with advanced technology, choosing lower-cost countries like Hungary and Spain. Volkswagen, in parallel, is evaluating how to utilize or divest under-utilized industrial capacities in Germany, considering options such as producing specific models for the Chinese market in Europe and possible partnerships in the defense sector. Blume concluded by indicating that decisions should be made by the end of the year.
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