Volkswagen's Profit Fell by 44%. The Concern Will Cut 50,000 Jobs in Germany

Illustrative image. Photo: Krisztian Bocsi/Bloomberg via Getty Images

The company's CEO Oliver Blume informed shareholders that the cuts will take place in Germany and affect the entire group: Volkswagen Group owns several other well-known brands, including passenger cars Audi, Bentley, Lamborghini, Porsche, SEAT and Škoda, trucks MAN and Scania, and motorcycles Ducati.

“Overall, around 50,000 jobs will be cut in the Volkswagen Group in Germany by 2030,” Blume wrote in a letter to shareholders in the company's annual report. “We are operating under fundamentally different conditions.”

The concern stated that the drop in profit is caused by the introduction of import duties by the United States, fierce competition with Chinese manufacturers, and high restructuring costs due to the transition to electric vehicle production.

Volkswagen intends to close three plants in Germany and lay off tens of thousands of people.

The company forecasts an improvement in the situation next year, but its CFO Arno Antlitz emphasized that it will have to focus on "strict" cost cutting. Volkswagen has already reached an agreement with trade unions to cut more than 35,000 jobs nationwide in a "socially responsible manner" by 2030, which will save about 15 billion euros.

Decreased Demand in China and Tariffs

Along with other German car manufacturers, Volkswagen has been severely affected by the decline in demand for its cars in China, which previously remained the most important market. At the same time, Chinese brands are entering the European market, increasing pressure on European manufacturers.

US President Donald Trump's decision to introduce 25% tariffs on car imports further exacerbated the situation.

In its annual reports, Volkswagen announced that its net profit after tax last year decreased from 12.4 billion euros to 6.9 billion euros. For 2026, Volkswagen forecasts a basic return on sales of 4-5.5%.

Antlitz warned that the group's profitability “is not sufficient in the long term.”

“We will only be able to achieve this goal if we continue to strictly cut costs,” he said.

The automotive industry accounts for about 20% of Germany's total industrial production and 6% of the country's GDP. The industry directly employs about 780,000 people. From 2017 to 2023, VW sales decreased from 10.7 million to 9.2 million units.

What are the Reasons for the Crisis: The “Electric Revolution” and High Costs

As EU countries are gradually phasing out internal combustion engine cars, manufacturers have to invest hundreds of billions of euros in electric vehicles. However, the "revolution" expected by optimists has not yet occurred. At the end of 2023, subsidies for electric vehicle buyers were cancelled in Germany, which led to a 27% drop in sales.

In addition, Germany remains the most expensive place in the world for car manufacturing (the average salary in the industry is about 5300 euros per month). Russia's invasion of Ukraine and the rejection of cheap Russian gas led to a sharp increase in energy prices. The US and Israel's war against Iran threatens to make this problem even more acute. American tariffs and a 10% drop in demand in China finally crippled the industry.

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