Volkswagen Group is bracing for another wave of significant cost reductions, with executives signaling plans to slash expenses by an estimated €60 billion (approximately A$100 billion) by 2028. This move comes as the automotive giant navigates increasing pressures from market shifts, geopolitical uncertainties, and rising development costs.
The Scale of Planned Cuts
During a recent meeting with 120 senior managers, CEO Oliver Blume and CFO Arno Antlitz reportedly outlined the need for aggressive cost-cutting measures across all brands and divisions. While specific areas for savings remain undisclosed, potential options include plant closures – a previously rare step for the company, as demonstrated by the recent shuttering of its Dresden facility.
This follows an earlier agreement with unions to reduce the workforce by up to 35,000 positions by 2030. The program has already delivered substantial savings, which the company credits with helping it weather global economic turbulence, including trade tensions in the US.
Drivers Behind the Cuts
The urgency behind these cuts stems from multiple factors:
- Weakening Position in China: Volkswagen’s dominance in the Chinese market, once undisputed, has eroded rapidly. Sales have fallen by 36.4% since their peak in 2019, with the company now trailing behind domestic competitor BYD.
- US Tariff Policies: Fluctuating trade policies in the United States add financial uncertainty, forcing the company to proactively reduce costs.
- Investment in New Technologies: Volkswagen is heavily investing in software development, electric vehicles, and improved combustion engines, necessitating financial discipline in other areas.
Despite maintaining strong global sales overall (8.96 million vehicles in 2025 ), the decline in China is particularly concerning given its historical importance to Volkswagen’s revenue. The company’s market share has decreased sharply since losing the top spot to BYD in 2023.
What’s Next
Volkswagen is expected to unveil detailed plans for these cuts on March 10 during its annual results press conference. The company faces a critical period of restructuring as it adapts to an increasingly competitive global automotive landscape.
The aggressive cost-cutting measures underscore the intense pressure facing legacy automakers in the transition to electric and software-defined vehicles. Failing to adapt quickly could jeopardize Volkswagen’s long-term viability in key markets like China.
