The once-purring engine of the German auto industry is sputtering. Volkswagen, the world’s second-biggest carmaker, is planning to end production at four plants and cut up to 100,000 jobs. What will be one of the largest downsizing programmes in corporate history is also a test of German industry’s ability to reform itself for the electric vehicle era and to confront “China shock 2.0”.
The pressure has been clear since 2024, when VW warned it needed to axe thousands of jobs and shut three German plants. Tough negotiations with unions agreed in December that year to cut 35,000 jobs, but without outright German factory closures. US tariffs, rising energy costs and a worsening situation in China have made that insufficient. In March VW raised its job reduction target by 2030 to 50,000, but double that may now be needed. Unless certain cost targets are met, management is threatening to close four plants, two of which have already been expensively converted to producing EVs.
China was for years a lucrative market for VW and its German counterparts. Chinese rivals, though, have leapfrogged ahead in EV technology. They did benefit from huge state subsidies and lower labour costs. But they also understood more quickly than old-line carmakers that EV buyers are more excited by whizzy software and computer systems than by mechanics.