Volkswagen, Europe's largest automaker, is grappling to stay competitive in the electric vehicle market. Last year, Volkswagen launched a cost-cutting program aimed at saving €10 billion ($11.06 billion) by 2026. But according to a report by German business daily Handelsblatt, Volkswagen's cost-cutting needs to go much further then previous forecast, with the carmaker needing to make an additional €4 billion in savings to remain viable. For this VW are faced with having to consider more radical cost cutting measures, including the potential of at least one plant closure in Germany and/or staff redundancies.
VW Group CEO Oliver Blume said that the European automotive market is in a "highly challenging and serious situation," and that Germany had fallen behind in terms of competitiveness. Consequently, 10 car brands within the VW Group are being comprehensively restructured, and "plant closures are no longer excluded," Blume said, adding that layoffs through early retirement and severance packages are also no longer sufficient. VW have recently announced that they have had to end their 30 year old employment protection agreement, in anticipation of what may need to come next from a business transformation perspective, to secure its future viability.
So how did this once automotive superpower end up here? Its likely that high inflation rates, interest rates, and the end of EV subsidies in Germany has hit the VW Group hard in recent years. Couple that to the carmaker's sales growth slowing throughout 2024, and a European auto industry grappling with a slump in demand for electric. To make matters worse, competition from market leaders in the EV sector, such as Tesla and BYD has intensified in Volkswagen's backyard, with the company unable to respond.
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