Volkswagen Group Struggles: Must Cut Production Capacity

• Volkswagen Group has to cut production capacity by a million units.
• It will focus on reducing capacity in Europe and China.
• The company is facing numerous challenges, including tariffs, competition, and the war in the Middle East.

In 2019, before the pandemic, Volkswagen Group was riding high. The German auto conglomerate sold nearly 11 million cars worldwide and was preparing for 12 million, but it never got close to that figure. Since 2020, the company has failed to sell more than 10 million vehicles a year, which is insufficient given its available production capacity.  

In a recent interview with Manager Magazin, VW Group CEO Oliver Blume said that the automaker plans to reduce its annual capacity by another one million units. The company, like the rest of the industry, is facing numerous geopolitical challenges with no clear end in sight. He told the publication:  

‘The tariffs in the USA, the immense competitive pressure in China, the shrunken European market, now the war in the Middle East. Who knows what’s next? These developments do not just pass. This is the new normal. And we will face it.’

Those challenges, parried with its overcapacity, “is not sustainable for our company long term,” he said, adding, “And in today’s market and competitive situation, the volume planning of the past is unrealistic.”  

Blume has said he wants to avoid plant closures and will not rule out selling one to a Chinese competitor as he looks to reduce capacity in Europe and China. The company needs to cut costs by 20 percent in just a few short years.  

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VW Group Continues To Struggle

This is not the first time the automaker has had to consider reducing capacity. In 2024, rumors surfaced that Volkswagen could close up to three factories in Germany, with unions feverishly negotiating with the automaker to keep them open. The works council even suggested sweeping wage cuts.  

In 2025, Volkswagen then faced stiff tariffs in the United States, which cost the company $1.5 billion in the first six months of that year. Sales for the Volkswagen and Audi brands tumbled last year, while Porsche was steady, but as Blume said, the company still faces numerous challenges.  

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Motor1’s Take: Volkswagen Group’s struggles show just how volatile the automotive industry is right now. In just a few short years, the entire global landscape changed, forcing companies to make drastic decisions in order to compete. 

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