Last Updated on 10 hours ago by TodayWhy Editorial
Why is Volkswagen cutting so many jobs? The surface answer is the one in every headline: Chinese electric-vehicle rivals are eating Volkswagen’s market share, tariffs are squeezing margins, and Europe is stuck with roughly 500,000 vehicles a year of unused factory capacity. The deeper answer is less comfortable for Germany: for two decades, German automakers helped build the very Chinese industry that is now out-competing them, and Volkswagen is now paying the bill for that trade-off.
Volkswagen’s supervisory board met in Wolfsburg on July 9, 2026, to decide the company’s future. Reports beforehand put the number as high as 100,000 job cuts — about 15% of the group’s roughly 657,000 employees — plus the closure of four German plants. The board didn’t confirm those numbers. But it did sign off on a “Zukunftsplan” that halves the model lineup and cuts planned production capacity to 9 million vehicles a year, down from a pre-pandemic target of 12 million. Here’s what’s actually driving the cuts, at both the level everyone talks about and the level almost nobody does.
The Surface Reasons: What the Company Says Is Happening
Volkswagen’s own account of the crisis centers on a few concrete pressures. First, Chinese competition: brands like BYD, Geely, NIO and Li Auto now build electric vehicles that compete with German brands on price, software, and battery technology — including inside China itself, once the group’s most profitable market, where deliveries have fallen to their lowest level since 2011. Second, U.S. tariffs on cars and car parts are expected to cost the company around €5 billion a year, according to Euronews’ reporting on the July 9 board meeting, with Audi and Porsche especially exposed since neither has a US factory. Third, CEO Oliver Blume has said the group faces a roughly 20% cost disadvantage against competitors, and warned that VW and Audi “cannot yet confirm competitive utilization” for the Emden, Hanover, Zwickau, and Audi Neckarsulm plants into the 2030s. The financial picture backs up the urgency. First-quarter 2026 revenue fell 2% to €75.7 billion, and operating profit dropped 14.3% to €2.5 billion, pushing the operating margin down from 3.7% to 3.3%. The stock has lost around 30% of its value since the start of 2026 and is trading near its lowest levels since 2010. The automaker is also strikingly inefficient by industry standards: it sold about 13.6 vehicles per employee in 2025, compared with roughly 28.9 for Toyota — meaning Toyota builds and sells more than twice as much car per worker.
The Deep Cause: Germany Built the Competitor That’s Now Beating It
The surface story treats Chinese competition as something that simply happened to the company. The deeper story is that Volkswagen — and the German auto industry as a whole — helped create it. For decades, China was Germany’s largest and most enthusiastic export market: VW, BMW, and Mercedes-Benz built vast joint-venture manufacturing operations there, transferring production know-how, supply-chain relationships, and engineering practices to Chinese partners in exchange for market access. As TodayWhy has reported, China has since converted much of that access into permanent ownership: a 2026 study by the German Economic Institute found that Chinese entities now hold more than 11,300 patents originally developed in Germany, with mechanical engineering — the backbone of automaking — among the hardest-hit sectors. The pattern followed a recognizable escalation: China went from customer, to manufacturing partner, to equity investor, to outright patent owner. Once Chinese firms held the underlying technology, the relationship flipped. The same study found Germany’s global R&D ranking has slipped from third place in 2000 to sixth by 2021, even as China’s research spending grew roughly twentyfold over the same period. Chinese EV makers also benefit from state subsidies that the OECD estimates run three to eight times higher than what Western manufacturers receive — a scale of state support no single company, including Volkswagen, can easily out-compete.
Why Volkswagen Specifically Struggles to Respond
Even recognizing the problem, Volkswagen faces a structural constraint most competitors don’t: German co-determination law and the so-called “VW Law” give the state of Lower Saxony, which owns roughly 20% of Volkswagen’s voting shares, and labor representatives a combined majority on the supervisory board. That’s why the board could not simply approve sweeping plant closures on July 9 — Lower Saxony’s government and worker representatives, who together hold more board seats than shareholder representatives while one capital-side seat sits vacant, effectively hold veto power. A 2024 agreement with union IG Metall already ruled out compulsory layoffs and blocked outright factory closures through 2030, forcing management to pursue cuts through early retirement, severance packages, and attrition instead — a slower, more expensive path than the swift restructuring available to leaner rivals. This is also why Volkswagen’s cuts have unfolded in stages rather than one announcement. A 2024 deal targeted 35,000 job losses at the core VW brand by 2030 (more than 28,000 already locked in through voluntary agreements by June 2026), part of a wider 50,000-job reduction across Volkswagen’s German operations including Audi and Porsche. Porsche alone is now cutting a further 4,000 jobs on top of 4,000 announced in March. The reported 100,000 figure would represent a dramatic escalation beyond all of that — and explains why unions and Chancellor Friedrich Merz’s government have vowed to fight it.
What Happens Next
Volkswagen is expected to release its first-half 2026 results on July 24, offering the clearest picture yet of whether the “Zukunftsplan” is enough to stabilize the business without the full 100,000-job scenario. Any plant closures reportedly under discussion — Zwickau and Emden as early as 2031, Hanover in 2032, and Audi’s Neckarsulm site by 2034 — would still need supervisory board approval, where Lower Saxony and labor representatives retain effective veto power. Whatever the final number, the underlying dynamic won’t reverse quickly: the technology and manufacturing capability Germany transferred to China over two decades cannot be un-transferred, and Volkswagen’s response to that reality is likely to keep shaping German industrial policy for years.
About Volkswagen
Volkswagen was founded in 1937 in Wolfsburg, Germany, on the instructions of the Nazi government, with a mandate to build an affordable “people’s car” — the literal meaning of the company’s name. That original car, designed by engineer Ferdinand Porsche, became the Volkswagen Beetle, one of the best-selling vehicles of all time.
Today, Volkswagen AG is the parent of Volkswagen Group, one of the world’s largest automakers, competing with Toyota for the title of the biggest carmaker by global sales. The group’s ten brands span the entire market, from mass-market cars (Volkswagen, Škoda, SEAT/Cupra) to premium and luxury vehicles (Audi, Porsche, Bentley, Lamborghini) and commercial trucks (Scania, MAN).
Volkswagen Group employed roughly 657,000 people worldwide as of early 2026, generated €321.9 billion in revenue in 2025, and operates factories across Europe, the Americas, and Asia — including its largest single market, China, where it has manufactured cars through joint ventures for four decades.
Frequently Asked Questions
How many jobs is Volkswagen actually cutting?
Confirmed agreements target roughly 50,000 job losses across Volkswagen’s German operations (including Audi and Porsche) by 2030, with more than 28,000 already locked in through voluntary departures as of June 2026. Reports from Manager Magazin and others say management is weighing an escalation to as many as 100,000 jobs worldwide, but the supervisory board has not confirmed that figure.
Which Volkswagen plants might close?
Reports citing supervisory board sources say Volkswagen and Audi are considering closing plants in Zwickau and Emden as early as 2031, Hanover in 2032, and Audi’s Neckarsulm site by 2034. Combined, those four plants employ roughly 40,000 people. No closures have been formally confirmed.
Why can’t Volkswagen just close plants like other companies do?
German co-determination law and Lower Saxony’s roughly 20% ownership stake give labor representatives and the state government a combined majority on Volkswagen’s supervisory board, giving them effective veto power over major restructuring decisions. A 2024 agreement with IG Metall also ruled out compulsory layoffs and blocked factory closures through 2030.
Is Chinese competition really the main reason for Volkswagen’s crisis?
It’s the most visible reason, but analysts and Volkswagen’s own patent history point to a deeper cause: German automakers transferred manufacturing know-how and technology to Chinese partners for decades in exchange for market access, and China has since converted much of that into independent technological capability, now used to compete directly against the companies that helped build it.