In the face of intense market competition, Volkswagen China is also aiming to reduce costs and improve efficiency. On September 23, market rumors suggested that Volkswagen China plans to implement phased layoffs, with hundreds of local employees expected to be cut at the group level. In response, Volkswagen China told a reporter from The Paper that in 2023, Volkswagen Group initiated a performance plan across all its brands to maintain success amidst challenging industry conditions.
The group has set clear goals: to increase efficiency by 20% by 2026. Volkswagen Group (China) is actively participating and supporting the global performance plan, with specific measures including adjusting organizational structures, enhancing the digitalization of work processes, strengthening collaboration between brands and departments in China, and reinforcing localization of projects.
Volkswagen stated that in this context, Volkswagen Group (China) is continuously improving the efficiency of departments and projects, optimizing costs. According to the actual situation, relevant measures also involve direct labor costs and indirect labor costs, including administrative expenses, travel expenses, and training costs.
In the context of electric vehicle transformation, Volkswagen, a traditional fuel vehicle giant, is facing significant challenges. According to foreign media reports, Volkswagen Group plans to lay off 30,000 employees in Germany to become more competitive in the European automotive market. The largest layoffs will occur in the research and development department, with up to 6,000 out of 13,000 R&D staff expected to be laid off.
Volkswagen even made a historic decision, considering closing two domestic factories in Germany to cut costs. On September 2, Volkswagen announced that it is considering closing one car factory and one parts factory in Germany to reduce costs. This will be the first time in Volkswagen’s history to close a German factory, meaning it will abandon its promise not to lay off employees before 2029.
The latest financial report shows that Volkswagen’s second quarter 2024 revenue reached 83.34 billion euros, a year-on-year increase of 4.1%; operating profit was 5.46 billion euros, a year-on-year decrease of 2.4%; global sales were 2.244 million vehicles, a year-on-year decrease of 3.8%.
Volkswagen said in its financial report that sales performance in North America and South America can almost offset the impact of declines in other regions, especially the significant decline in the Chinese market.
In the Chinese market, Volkswagen has lost its dominant position. In the first half of this year, Volkswagen’s sales in China reached 1.345 million vehicles, a year-on-year decrease of 7.4%. The reason is that the Chinese market is highly competitive. In terms of market share, the Chinese market accounts for 30.9% of the global total, and during its peak, China has been contributing 40% of Volkswagen’s global market share.
In addition, Volkswagen has lost its dominant position in the Chinese automotive market for many years. But in fact, among joint venture companies, Volkswagen is considered to be the fastest in transformation. The sales of Volkswagen’s ID series have been on the rise for nearly two years, but domestic Chinese brands have a greater first-mover advantage in the field of intelligent electric vehicles.
Now, Volkswagen Group is working to address its shortcomings through strengthened local cooperation.
Last year, Volkswagen Group officially announced that it would participate in the vigorous development of the Chinese electric vehicle market through cooperation with Volkswagen brand and Xpeng Motors, as well as Audi brand and SAIC Group.
Among them, Volkswagen brand and Xpeng Motors reached a technical framework agreement to jointly develop two electric vehicle models for Volkswagen brands and plan to enter the market by 2026. Volkswagen Group acquired about 4.99% of Xpeng Motors’ equity. Audi, in collaboration with its Chinese joint venture partner SAIC Group, will develop a portfolio of smart connected electric vehicles for the high-end market. As a first step in the plan, Audi will enter previously un-covered细分 markets in China by launching new electric vehicle models.
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