Volkswagen has drawn up an internal document titled "Group Target Picture" that freezes pay rises for most of its roughly 600,000 global employees until 2030 and trims variable pay, bonuses and other benefits, according to a report by German outlet Süddeutsche Zeitung cited by Chinese news site D1EV. The document also asks every brand, region and plant to make a "reasonable" contribution to group-wide cost cuts.
The move comes months after CEO Oliver Blume told German magazine Manager Magazin that Volkswagen plans to cut up to 100,000 jobs worldwide - double an earlier target of 50,000 - close four plants in Germany and reduce its five-year investment budget by about 15% to just over 130 billion euros, D1EV reported.
Volkswagen has also shifted its smart-driving strategy from full in-house development to supplier partnerships, including a joint venture with Chinese chipmaker Horizon Robotics and the use of local silicon and large-model AI. The FAW-Volkswagen ID. AURA T6 became the 15 millionth vehicle to use Horizon's Journey chips, according to D1EV.
China profits collapse
The restructuring is driven by deteriorating financials. Volkswagen delivered 6.011 million vehicles globally in the first three quarters of 2026, down 9% year on year, with third-quarter deliveries falling 14.3% to 1.885 million units. In China, deliveries plunged 30.2% to 1.379 million vehicles in the first nine months, and the third quarter alone fell 38.5% to 405,800 units, D1EV said.
Equity income from Volkswagen's Chinese joint ventures dropped from 2.621 billion euros in 2023 to just 184 million euros in the first half of 2026 - a decline of more than 90% in two and a half years. The profit erosion per vehicle sold in China far outpaced the drop in volume.
D1EV notes that Toyota's sales outlook for fiscal 2026 is 11.18 million vehicles, while Volkswagen has lingered around 9 million annual deliveries for years, leaving a gap of more than 2 million units that has shown no sign of narrowing.
European industry-wide retrenchment
Volkswagen is not alone. Mercedes-Benz launched a voluntary severance programme in April last year, and its production chief said in September that German plants could close if cost-cutting talks with labour fail, prompting protests by more than 20,000 workers in Stuttgart. BMW announced voluntary departures for indirect employees in Germany and a 20% reduction in management positions, planning to cut thousands of indirect jobs by the end of 2027, D1EV reported.
Stellantis has booked roughly 22.2 billion euros in business-reset provisions, with about 6.5 billion euros in cash outlays spread over four years.
The collective contraction reflects falling competitiveness of European carmakers in the global shift to electrification, D1EV argues. High wages and generous benefits, once strengths, have become burdens in a cost war driven by Chinese rivals, while overcapacity, weak demand and heavy sunk costs in EV development squeeze room to manoeuvre.
At the Paris Motor Show, Volkswagen passenger-car chief Thomas Schäfer said that after two years of restructuring development processes with Chinese partners, material and engineering costs have fallen sharply, and models built "in China, for China" are now cost-competitive and could be exported to Australia and the Middle East, according to D1EV.
The broader context: Mobility Global data cited by D1EV shows pure petrol cars fell below 50% of global new-vehicle sales in the first half of 2026 for the first time since mass motorisation in the 1920s, while China's passenger-car retail data shows petrol's share dropped below one-third in September, with new-energy vehicles reaching a record 67% penetration.
