Volkswagen to cut 100,000 jobs, but it is really cutting the old Volkswagen

At first glance, it sounds like a classic crisis plan: profits fall, people are sent home and factories are closed. In reality, Volkswagen’s problem is more complex. The group is not simply trying to survive the next economic downturn; it is shedding part of the structure on which its success of recent decades was built.

And that is precisely why Volkswagen shares rose sharply after the plan was approved. Investors were not celebrating the loss of 100,000 jobs. They were celebrating the fact that Volkswagen finally appears capable of making decisions.

100,000 does not mean 100,000 redundancies

First, the figures need to be put into context. At the end of 2025, the Volkswagen Group employed nearly 663,000 people, including its Chinese joint ventures. The first wave of cuts, affecting around 50,000 jobs, had already been agreed and mainly concerns Volkswagen, Audi, Porsche and CARIAD in Germany. According to Volkswagen, agreements covering the departure of around 37,000 people had already been signed by summer.

In Germany, the aim is to achieve as much of this as possible through natural attrition, early retirement, partial retirement and voluntary departures. So there is no need to imagine 100,000 people walking out through factory gates at the same time.

The new plan adds approximately 50,000 jobs to the earlier cuts worldwide, and Volkswagen specifically stresses that management and administrative positions will also be affected. There is not yet a precise breakdown by country, brand or factory.

That last point matters, because Volkswagen’s problem is not only expensive German factory workers. The group also considers its own management too expensive.

Volkswagen became too large a machine

For decades, Volkswagen’s strength was scale. An enormous number of brands, models, factories, platforms, development units and management layers were gathered under one group.

When sales were growing, that logic worked well. At nine or ten million cars, major fixed costs are spread across a large number of vehicles.

But the same system quickly becomes a problem when market growth stops.

Volkswagen is now planning its future on the assumption of annual sales of around nine million cars. This marks a significant shift in thinking: its strategy is no longer based on the hope that sales volumes will soon return to their previous growth path. The group wants to make healthy profits even if nine million cars is the new normal.

To achieve that, it is targeting a 9% operating margin and operating profit of around €31 billion by 2030. By comparison, the operating margin in the first half of 2026 was only 3.8%.

The gap is not cosmetic. Volkswagen essentially wants to make the group several times more efficient at the same sales volume.

Half of the model range will disappear

The 100,000 jobs are the most striking figure, but another decision may be even more significant.

Volkswagen plans to cut the group’s model range by around half by 2035 and reduce the complexity of the variants and combinations it offers by around 75%.

That says a great deal about Volkswagen’s previous strategy.

For decades, the group’s brands tried to fill almost every possible market niche. Separate models, body styles, powertrains, trim levels and regional versions created an impressive catalogue, but every additional variant requires development, homologation, spare parts, logistics, software and manufacturing complexity.

China’s new carmakers have often taken the opposite approach: fewer models, shorter development cycles and faster updates.

Volkswagen is now trying to solve the same problem on its own scale. Fewer models mean higher production volumes per model and the opportunity to use the same technical solutions far more widely. This may be the most important part of the entire plan.

Four German factories remain under a cloud

The most painful issue is production. Volkswagen itself acknowledges that the group currently has excess production capacity in Europe equivalent to around 500,000 cars. Under the current situation, sufficient competitive follow-on production programmes have not been found for the Emden, Zwickau, Hannover and Neckarsulm plants for the years 2031–2034. Volkswagen is not yet saying that these factories will definitely close. It promises time to find alternative uses, while a new overall plan for the European production network is due by the end of June 2027.

The wording is diplomatic, but its meaning is fairly clear: not every current plant may reach the next decade as a car factory.

This is significant for Germany. Volkswagen had already agreed in 2024 to reduce the technical production capacity of its German plants by around 734,000 cars. This figure cannot simply be added to the current 500,000, because the metrics and scope are not the same, but both point to one problem: the current structure of European car production was built for greater demand than actually exists.

China is no longer Volkswagen’s cash machine

A large part of Volkswagen’s current problem begins in China. Only a few years ago, Volkswagen’s Chinese joint ventures generated the money that could comfortably fund Europe’s complex manufacturing network and the development of future cars. Now the balance of power in China’s automotive industry has changed.

In the first half of 2026, Volkswagen Group sales in China fell by 25.9%. The situation for electric cars was even more dramatic: deliveries in China dropped by nearly 48%.

The problem is not simply that Chinese buyers are buying fewer cars. They are buying different cars. BYD, Geely, Xiaomi and a host of other local manufacturers have made software, user interfaces, electric powertrains and rapid model updates standard competitive tools in China. German manufacturers’ traditional advantages — engines, gearboxes, handling and a reputation built over decades — no longer command the same price premium.

Volkswagen is responding with increasingly extensive local development and China-specific technology. The new strategy explicitly states that the development of the group’s electronics, software and platforms will be divided more clearly between the needs of the Western and Eastern hemispheres.

In essence, Volkswagen is abandoning the idea that a car developed in Wolfsburg can suit the entire world with only minor modifications.

Why did the share price rise?

After the restructuring plan was approved, Volkswagen shares rose by nearly 6% to their highest level in 11 weeks. On the surface, this may seem cynical: 100,000 jobs disappear and the stock market applauds.

The real reason lies in Volkswagen’s ownership structure.

Volkswagen is not an ordinary listed company in which management decides on cuts and the supervisory board approves them. Porsche SE controls 53.3% of voting rights, the state of Lower Saxony holds 20%, and employee representatives have an exceptionally strong position on the supervisory board. Lower Saxony also has the right to appoint two supervisory board members.

For decades, the system has helped protect jobs and German factories. At the same time, it makes sweeping restructuring exceptionally difficult.

Only a few days before the agreement, the situation was so tense that management was considering taking the restructuring plan directly to shareholders. In Volkswagen’s case, that would effectively have meant open war between management, employees and a federal state that is a major shareholder.

That war did not happen.

Investors therefore saw in the agreement something they had long been waiting for from Volkswagen: proof that the group is capable of making painful decisions despite its complex political governance system.

The hardest decision has not yet been made

Cutting 100,000 jobs sounds like a huge decision, but it is only a framework.

It is not yet known exactly where the new 50,000 cuts will come from. The final fate of the four German factories has not been decided. The group also wants to reduce its portfolio of holdings and ancillary activities by around one-third, which will probably mean selling or restructuring companies. At the same time, it must halve the number of models and rebuild its management system.

Most difficult of all, however, is doing this without Volkswagen cutting precisely the investments on which its competitiveness depends in the name of saving money.

Chinese manufacturers are not waiting. Software is not getting cheaper. Developing new electric platforms still requires billions, while in Europe the group must compete simultaneously with Renault', Stellantis and Toyota as well as BYD, Geely and other Chinese groups.

Volkswagen’s plan is therefore not a conventional restructuring after which the company can continue as before.

It cannot continue as before.

The loss of 100,000 jobs, a model range half the size, potential factory closures and a simpler management structure show that Volkswagen is preparing for a world in which Europe’s car market no longer grows quickly, China no longer finances German carmakers’ profits, and the electric car requires less mechanical complexity and ever more software.

If the plan succeeds, Volkswagen will be a smaller, simpler and far more profitable company in the early 2030s. If it fails, the question will no longer be whether Volkswagen has 50,000 employees too many. It will be whether Europe’s largest automotive group can change quickly enough at all.