Volkswagen is facing a severe crisis in China, with sales plummeting 31% to 1.4 million vehicles in the first nine months of 2026, compared to the same period last year. This significant decline has put pressure on the entire group, including its German headquarters. The company's Chinese operations have historically accounted for up to 50% of its profits, but this share has dwindled to around 10% in 2026.
The struggles in China are having a ripple effect on Volkswagen's finances, with the company's stock price dropping around 35% since the beginning of the year. The dividend for the 2025 financial year was already reduced by 17% to 5.26 euros per preferred share. Analysts expect further dividend cuts in the coming years due to the persistent crisis in results, high restructuring costs in Germany, and declining net cash flow.
A significant factor contributing to Volkswagen's struggles is the high cost structure of its German sites, including Wolfsburg and Zwickau. In contrast, Chinese sites like Hefei have much lower labor costs, and the company can access cheaper batteries and more agile development processes. Volkswagen's German sites must import batteries at high prices or build expensive local battery factories, adding to the cost burden.
To address these challenges, Volkswagen's management, led by CEO Oliver Blume, has adopted a drastic austerity plan. The company aims to cut 50,000 to 100,000 jobs globally by 2030, with around half of these cuts expected to affect German sites. This includes potential job losses at major sites like Wolfsburg, Hanovre, Zwickau, Emden, and Neckarsulm. The company plans to implement these reductions through measures like early retirement, severance packages, and new transfer companies.
Meanwhile, Volkswagen is investing around 3 billion euros in a new development center in Hefei, Anhui province, China. This center is at the heart of the company's new global strategy, "In China, for China." The strategy involves developing vehicles locally, using Chinese expertise and partnerships to reduce costs and improve competitiveness. The company aims to shorten development times, with the new electric model ID.UNYX 08, a fully connected SUV, developed in just 24 months.
The new development center in Hefei is a key part of Volkswagen's efforts to revamp its Chinese operations. By working closely with local partners and using agile development processes, the company aims to create vehicles that are more competitive in terms of price and technology. This includes using local suppliers, reducing engineering and material costs, and improving software development.
The crisis at Volkswagen has sparked concerns about job security and the future of the company's German sites. IG Metall, the union representing workers' interests, is resisting the planned job cuts and accuses the company of violating collective bargaining agreements. A definitive concept for the future production structure is expected to be finalized by June 2027.
Key points
- Volkswagen plans to cut 50,000-100,000 jobs globally by 2030.
- The company's Chinese operations have declined significantly, with sales dropping 31% in the first nine months of 2026.
- Volkswagen is investing 3 billion euros in a new development center in Hefei, China, to improve its competitiveness in the local market.
