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Volkswagen will shed hundreds of jobs at the group level in China as the company is unable to stop falling sales in the largest market, according to media reports citing people familiar with the matter. It is worth mentioning that Audi is also laying off staff alone.

In response, Volkswagen responded that the move was part of its global efforts to reduce costs, but declined to specify the number of layoffs. Volkswagen announced a "cost-cutting" campaign in December 2023, with plans to save 10 billion euros in costs by the end of 2026 and increase operating margins from 3.4 per cent to 6.5 per cent. However, the Volkswagen passenger car brand is still 2 billion to 3 billion euros short of its cost-saving target this year. Volkswagen Group (China) will make a significant contribution to this, the company said in an email. Optimization measures "may also include direct and indirect human costs", such as administration, travel and training. Of course, Volkswagen layoffs are still under way, and the exact number is not known.

The Chinese market is Volkswagen's largest market in the world. The decline in the competitiveness of fuel vehicles and the unsuccessful transformation of electric vehicles have put great pressure on Volkswagen's weak sales in the Chinese market. If we lose the Chinese market, the myth of Volkswagen will collapse, which is why Volkswagen is accelerating its efforts to dig deep into the Chinese market, while at the same time shutting down factories and forcing layoffs in the uncompetitive German market.

From 1990 to 2019, Volkswagen's annual sales increased from 3 million to 10.97 million. The Chinese market contributed 4.23 million vehicles, accounting for about 40% of the world's total sales, and has been the world's largest single market for many years in a row. From 1985 to 2023, Volkswagen occupied the first place in China's auto market, until the accelerated replacement of new energy vehicles (including plug-in) to pure fuel vehicles. Since the Xinguan outbreak, Volkswagen's sales in China have begun to decline, from 4.23 million in 2019 to 3.85 million in 2020 to 3.23 million in 2023, a reduction of about a million vehicles in four years. After entering 2024, although Volkswagen joined a "price war" with Chinese automakers in the first half of the year, sales fell 7.4 per cent to just 1.35 million vehicles as its own brands accelerated to erode the joint venture market.

Baird, chairman and CEO of Volkswagen Group China, has said that Volkswagen's main competitor in the Chinese market is no longer other joint venture brands, but BYD. The two companies sold 4.23 million and 450000 vehicles respectively in China in 2019, compared with 1.35 million and 1.4 million in the first half of this year. If nothing happens, BYD will end Volkswagen's record of selling first place in China for 40 consecutive years this year.

As we all know, Volkswagen's electric vehicle sales come from pure electric vehicle ID. series. 2023, ID. The series has sold about 390000 units worldwide, less than 1/3 of the sales of Tesla's Model Y model, and it is still built on the background of low terminal transaction prices. As the major independent brands accelerate the internal price and products, the price advantage of Volkswagen electric cars has also disappeared, leaving only the Volkswagen brand halo to attract consumers to buy. Even so, Volkswagen will continue to invest more in the Chinese market, focusing mainly on electric cars, which may be its last chance to stay in the Chinese market.

A joint venture between Volkswagen and SAIC is preparing to close a factory in Nanjing as early as next year, according to media reports. A second factory has cut production and may also be closed or overhauled, according to people familiar with the matter.

In addition to the Chinese market, Volkswagen's performance in markets such as Europe and the United States is becoming more and more difficult. In the German market, Volkswagen issued a statement saying that given the current "extremely tight financial situation", the company did not rule out the possibility of closing its car manufacturing and parts plants in Germany, and planned to negotiate with union representatives. In addition, Volkswagen plans to terminate an employment protection agreement signed with trade unions in 1994 and prematurely end its commitment not to lay off staff in Germany until 2029.

No matter Volkswagen or other automobile companies, factory closure and layoffs are the most effective and fastest way for enterprises to reduce costs and increase efficiency. Not only car manufacturers, including German car supply chain companies, are also pushing for layoffs, and some have even been overwhelmed to declare bankruptcy restructuring. The prospect of factory closure by Volkswagen, one of Germany's most famous companies, is a further wake-up call for Europe's largest economy. Volkswagen is not an old-fashioned company, but it is difficult for elephants to turn around. it also has to face short-term labor pains.

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