Volkswagen Cuts Global Production by 3 Million Vehicles, Focuses on Restructuring and China Partnerships to Counter Sales Decline

Volkswagen Group announced it will reduce its global annual production capacity from the originally planned 12 million vehicles to 9 million—a cut of 3 million units—to better align with current market demand. CEO Oliver Blume stated the move aims to address a sluggish market environment. In 2025, Volkswagen delivered approximately 2.69 million vehicles in China, down 8% year-over-year, primarily due to intensifying competition from domestic brands. Sales in North America also declined, impacted by U.S. tariff policies. The restructuring focuses heavily on Volkswagen’s German plants, particularly the Emden and Zwickau facilities, which suffer from low utilization rates and high labor costs. Reports indicate that XPeng Motors is in talks with Volkswagen to potentially acquire parts of these factories. In 2023, Volkswagen invested around $700 million in XPeng, acquiring a 4.99% stake and partnering to co-develop two B-segment battery-electric vehicles, scheduled for launch under the Volkswagen brand in China in 2026. Currently, XPeng relies on Magna Steyr in Austria for vehicle contract manufacturing and is looking to expand its European operations. Additionally, Volkswagen plans to close its Osnabrück plant by 2027. The facility is exploring potential collaboration with an Israeli company to produce defense equipment components. The automaker also intends to cut 50,000 jobs in Germany by 2030, targeting an operating margin of 4%–5.5% in fiscal year 2026—up from 2.8% in FY2025—and aiming for a long-term operating margin of 8%–10% by 2030.