Volkswagen has approved one of the biggest restructuring programmes in its history, with fewer models, fewer jobs, lower factory capacity and a much tighter focus on profitable markets. The plan is meant to repair margins that have been hit by weak demand in Europe, falling profitability in China, high costs in Germany and expensive tariffs in the US.
The scale is unusually large. Volkswagen Group says it is planning around nine million vehicle sales a year by 2030 and wants an operating return on sales of 9 percent. It also plans to cut overhead costs by about 20 percent, reduce operating costs by roughly €20 billion by 2030 and limit capital spending plus research and development to €135 billion between 2027 and 2031.
A major part of the turnaround is simplification. By 2035, Volkswagen Group wants to cut its model portfolio by around 50 percent and reduce the complexity of its overall offering by roughly 75 percent. In simple terms, that means fewer low-volume models, fewer combinations and less duplication across brands.
The logic is straightforward. Higher volumes concentrated on fewer models can reduce development, purchasing and manufacturing costs. Volkswagen also wants to share more technology across its brands instead of running parallel programmes that solve the same problem more than once.
That approach will affect platforms, electronics, software, driver-assistance systems and powertrains. The company says products will also be tailored more closely to individual regions rather than assuming that one global solution will work equally well everywhere.
The most difficult part of the plan is manufacturing. Volkswagen says its European production network still has more than 500,000 vehicles of excess annual capacity. It will prepare a new European factory plan by the end of June 2027.
Under current planning, the Emden, Zwickau, Hanover and Neckarsulm plants do not have guaranteed follow-on vehicle allocations from 2031 to 2034. Alternative uses are being studied, but the company has not announced firm replacement projects for them.
The workforce will shrink as well. Volkswagen Group says a further adjustment of about 50,000 positions, including management roles, is required across the group. An earlier agreement at Volkswagen AG already provided for 35,000 jobs in Germany to disappear by 2030, mainly through socially managed reductions rather than immediate compulsory layoffs.
China is another major problem. Volkswagen has already reduced its workforce there from about 90,000 to 70,000 as sales and margins have come under pressure. Production capacity in China is also being reduced, while the company is relying more heavily on local development and partnerships to compete with domestic brands.
The US requires a different approach. Volkswagen has absorbed billions of euros in tariff-related costs and is reviewing how much more it should manufacture locally. Audi could eventually get its own US production site, while the group also wants to concentrate on higher-margin segments such as large SUVs and pick-up trucks.
Volkswagen’s plan is therefore not built around chasing maximum volume. The company wants nine million annual sales, but with fewer models, leaner factories and a higher return from each vehicle sold.
The urgency has increased after Volkswagen cut its 2026 profit outlook sharply. The group now expects an operating return on sales of no more than 1 percent for the year, with around €10 billion of special charges also weighing on results.