Under the circumstances of an unfavorable economic outlook and increasingly fierce competition, Volkswagen Group aims to reduce global overhead costs by 20% within the next three years.

According to foreign media reports, insiders revealed that Volkswagen Group has started layoffs in China, involving hundreds of local employees at the group level, and the group's luxury brand Audi is also conducting separate layoffs.

The insiders stated that earlier this week, some employees were notified of the plan. Some foreign employees will be sent back to Germany, and some middle and senior management personnel were dismissed.

The insiders also said that Volkswagen's layoffs in China will be led by Ralf Brandstaetter, head of the China region, and will be carried out in stages.

Volkswagen stated that the company's reforms include structural reorganization, process digitization, streamlining operations, and localization of some tasks.

Volkswagen China said: "In recent months, we have already identified a significant portion of the efficiency enhancement targets. Further measures are currently under review.""Insiders also revealed that Audi will be severely impacted by the efficiency enhancement measures. It is reported that Audi has more than 700 employees in China.

At present, with declining sales in China and the transition to electrification, the development of foreign luxury automotive brands in China has stagnated. This week, Mercedes-Benz Group announced another downward revision of its full-year earnings forecast for 2024, blaming it on weakness in the Chinese market.

Volkswagen Group employs 90,000 people in China, most of whom are employed by joint ventures, with Volkswagen China accounting for only a small portion of this total.

Regarding the layoff news, Volkswagen Group responded that the company reiterated its plan to reduce costs and increase efficiency globally by 2026 in August, and the aforementioned measures are part of this plan. However, the company refused to disclose the specific number of layoffs.

In an email, Volkswagen Group stated that Volkswagen Group China will "make a significant contribution" to this effort. Optimization efforts "may also include direct and indirect personnel costs," such as management, travel, and training. However, as this work is still ongoing, it is too early to give specific figures at this time.

Currently, the situation for Volkswagen Group in the Chinese market is not optimistic.

China is Volkswagen Group's largest single market, but low consumer confidence and the rapid shift towards electric vehicles have turned Volkswagen Group's former "fortress" into a weak link.

In 2023, Volkswagen's revenue from its joint ventures in China declined by 20% to 2.62 billion euros.

In August 2024, Volkswagen attributed part of the decline in its second-quarter operating profit margin to the slowdown in the Chinese market.

Due to fierce competition from local manufacturers such as BYD, Volkswagen's vehicle deliveries in China fell by 7.4% in the first half of 2024.

It is reported that as demand for internal combustion engine vehicles declines, SAIC Volkswagen is preparing to close at least one factory in China.

Volkswagen's situation in Germany is also severe.

Oliver Blume, CEO of Volkswagen Group, stated that as new competitors continue to flood into Europe, the environment is "becoming more difficult," and Volkswagen is also considering closing factories in Germany for the first time.

Image from Volkswagen