Volkswagen to Cut 1 Million Annual Vehicle Production Units by 2028, Plans Major Cost Reductions

Volkswagen Group is set to slash its annual global production capacity by an additional 1 million units by 2028, primarily in Europe, as part of a broader cost-cutting initiative. The move comes as the company grapples with persistent challenges in rebounding to pre-pandemic sales levels.

As of last year, Volkswagen had the capacity to produce approximately 12 million vehicles annually but sold only 8.68 million units. CEO Oliver Blume emphasized the unsustainability of current overcapacities, stating,

"Overcapacities are not sustainable for our company in the long term," Blume told Manager Magazin. "The volume planning of the past is unrealistic" in today’s market.

Blume outlined the company’s strategy, saying,

"In Europe, we will also reduce this figure by around one million by 2028, primarily at Volkswagen and Audi. We are facing negative impacts in the tens of billions and have taken massive countermeasures. Now the focus is on further lowering the break-even point to become even more resilient in a risky environment."

Prior to the COVID-19 pandemic, Volkswagen Group consistently sold over 10 million vehicles annually, peaking near 11 million units in 2017, 2018, and 2019. Blume noted that 2019 was the last year with predictable market conditions, calling a 9 million annual sales target a strong result under current circumstances.

A Changing Automotive Landscape

Blume highlighted several external pressures impacting Volkswagen’s operations, including:

• U.S. tariffs: Disrupting earnings and complicating access to a critical market.
• Increased competition: More automakers entering the market, intensifying rivalry.
• Middle East conflict: Disruptions in the auto industry supply chains and operations.

Blume remarked,

"The tariffs imposed in the U.S. are impacting our earnings and making access to an important future market more difficult. On top of that, more and more competitors are entering the market. Selling nine million vehicles in this current environment is a strong achievement." He added, "These developments are not simply passing."

While the specific European plants under threat remain undisclosed, Volkswagen’s electric-vehicle facilities in Emden and Zwickau currently operate below capacity. Blume suggested that one of the brand’s European sites could be sold to a Chinese competitor, potentially affecting up to 50,000 jobs in Germany by 2030.

Scout Brand: A Glimmer of Optimism

Despite the significant production cuts and job impacts, Blume expressed confidence in Volkswagen’s future prospects, particularly regarding its Scout brand and North American expansion.

He stated,

"These [Scouts] are great cars that fit perfectly into this market. Partnering with others would be a way for us to minimize risk. We could share the investment with other companies, and the partners could, for example, use our platform. However, we haven’t made a decision on that yet. The enthusiasm and anticipation for this brand are very high."