- The Volkswagen Group had to cut production capacity by one million units.
- It will focus on capacity reductions in Europe and China.
- The company faces a variety of challenges, including tariffs, competition and war in the Middle East.
In 2019, before the pandemic, the Volkswagen Group was growing rapidly. The German auto conglomerate sold nearly 11 million cars worldwide and was poised to sell 12 million cars, but they never came close to that number. Since 2020, the company has failed to sell more than 10 million vehicles per year, an insufficient number considering the available production capacity.
In a recent interview with Magazine ManagerVW Group CEO Oliver Blume said that the automaker plans to reduce its annual capacity by another million units. This company, like other industries, faces various geopolitical challenges with no clear end in sight. He told the publication:
“Tariffs in the US, huge competitive pressures in China, shrinking European markets, and now war in the Middle East. Who knows what’s next? These developments didn’t just happen out of nowhere. This is the new normal. And we will face it.”
Those challenges, addressed by overcapacity, “are not sustainable for our company in the long term,” he said, adding, “And in today’s market and competitive environment, past volume planning is not realistic.”
Blume said he wanted to avoid closing the plant and would not rule out selling it to a Chinese competitor as he seeks to reduce capacity in Europe and China. The company needed to cut costs by 20 percent in just a few years.
VW Group Continues to Struggle
This is not the first time the automaker has considered reducing capacity. In 2024, rumors emerged that Volkswagen would close three plants in Germany, and unions hurriedly negotiated with the automaker to keep the plants open. The workers’ council even suggested massive pay cuts.
In 2025, Volkswagen then faced stringent tariffs in the United States, which cost the company $1.5 billion in the first six months of the year. Sales of the Volkswagen and Audi brands plunged last year, while Porsche’s were stable, but as Blume said, the companies still face many challenges.
Motorcycle Pickup1: The Volkswagen Group’s struggles show just how volatile the automotive industry is today. In just a few years, the entire global landscape changed, forcing companies to make drastic decisions in order to compete.
