Volkswagen Plans to Cut Annual Production by 1 Million Vehicles Amid Mounting Market Pressures

Volkswagen is planning to further cut its annual production capacity by 1 million vehicles, aiming to reduce its global annual capacity from 12 million to 9 million units. CEO Oliver Blume stated the move is intended to adapt to the current global market environment and address multiple pressures, including geopolitical tensions, intensifying competition, and overcapacity. He noted that U.S. tariff hikes, fierce competition in China, shrinking demand in Europe, and conflicts in the Middle East have created persistent challenges that have become the industry’s “new normal.” To downsize capacity in Europe and China, Volkswagen does not rule out selling one of its plants to a Chinese competitor. The company also plans to cut costs by 20% over the next few years. Previously, Volkswagen had considered closing up to three plants in Germany, triggering urgent negotiations with labor unions; works councils even proposed across-the-board pay cuts to avoid plant closures. In the first half of 2025 alone, Volkswagen has already incurred losses of approximately $1.5 billion in the U.S. due to high tariffs. In 2024, sales of the Volkswagen and Audi brands declined significantly, while Porsche sales remained largely flat.