Volkswagen Group has begun cutting corporate jobs in China as part of its drive to reduce overhead costs by 20 percent globally over the next three years.
The cuts involve hundreds of local staff at the group level, according to people familiar with the matter, as Volkswagen battles a persistent sales decline in its biggest market. The company’s premium Audi brand is also cutting jobs, said the people, who asked not to be identified because the information is not public.
The moves are part of a worldwide effort to lower costs by 2026 that Volkswagen reiterated in August, the company said in response to questions from Bloomberg News, but declined to quantify the number of layoffs.
Volkswagen Group China will “make a significant contribution to this,” the company said in an email. The optimization effort “may also include direct and indirect personnel costs” such as administration, travel and training, the company said, adding that it was too early to provide figures as the effort was still ongoing.
A consumer downturn in China, coupled with the market’s rapid shift to electric vehicles, has turned Volkswagen’s stronghold into a weak spot. In August, the company blamed a second-quarter operating margin decline in part on the slowdown in China. Deliveries in mainland China fell 7.4 percent in the first half amid fierce competition from local manufacturers such as BYD Co., and fell 24 percent last year from 2019 levels.
At its German headquarters, Volkswagen is also considering plant closures for the first time, in an “increasingly difficult” environment with the entry of new players into Europe, CEO Oliver Blume said.
The local job cuts are being led by China chief Ralf Brandstaetter and will be gradual, the sources said. Beijing’s recent move to raise the country’s retirement age prompted Volkswagen to reassess its personnel levels and accelerate its job-cutting plans, they said.
Some workers were informed of the plan earlier this week, the sources said. Some expatriate employees were sent back to Germany and some mid- to senior-level managers were laid off, they said.
The corporate overhaul includes structural reorganization, digitalization of processes, streamlining of operations and localization of some tasks, the company said.
“Most of the efficiency targets have been identified in recent months,” VW China said. “Further measures are currently under review.”
Volkswagen’s premium Audi brand, which has more than 700 employees, will be hit hard by the efficiency drive, the people said. Foreign luxury brands have been hit hard by a slump in auto sales in China and a simultaneous shift to electric vehicles. Mercedes-Benz Group issued a profit warning on Sept. 20 amid a deepening slowdown in the world’s largest auto market.
Volkswagen China is just a fraction of the company’s 90,000 staff in China, most of whom are employed by its joint ventures. Bloomberg News reported this week that VW and its oldest partner, SAIC Motor Corp., are separately preparing to close at least one plant as demand for combustion-engine vehicles declines.
The company’s share of operating profit from its China joint venture fell 20 percent in 2023 to €2.62 billion ($2.92 billion), and has fallen by about half since 2015.