Volkswagen is fighting for survival in China, where its profits from local joint ventures have collapsed by more than 90% in two and a half years, according to a report by the Chinese outlet Huxiu. The German automaker, once the world's largest by revenue, now finds itself in a market where battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs) are rapidly replacing petrol cars.
Profit plunge
Equity income from Volkswagen's Chinese joint ventures fell from 2.621 billion euros in 2023 to 1.742 billion euros in 2024, and further to 958 million euros in 2025. In the first half of 2026, it was just 184 million euros – a drop of more than 90% from the 2023 level. Audi's China business saw its contribution fall 74% from 279 million euros to 73 million euros.
In 2019, Volkswagen sold 4.23 million vehicles in China, representing one in five new cars sold in the country. At its peak, Chinese joint ventures contributed about 5.2 billion euros annually, nearly 30% of the group's profit. Now, according to Huxiu, the market has turned from a "profit pool" into a "market share funnel" – money that once flowed in now leaks out.
The decline is not just cyclical. In the first half of 2026, China's passenger car retail sales fell 20.2% year-on-year to 8.701 million units, while Volkswagen's China deliveries dropped 26.1% to 971,000 units (or 31.1% for joint ventures alone). The overall market fell by a fifth, but Volkswagen fell by a quarter – losing an extra 10% of share in an already shrinking market.
Restructuring on a historic scale
Volkswagen's struggles are compounded by its product mix: only 4.5% of its China sales are new energy vehicles (NEVs), while the national NEV penetration rate reached 65.2% in August 2026, and 83.9% for domestic brands. The company is heavily reliant on petrol cars in a market that is rapidly electrifying.
In response, Volkswagen's supervisory board unanimously approved the "2030 Future Plan" on September 3, 2026 – described as the largest restructuring in its 89-year history. The plan includes cutting 100,000 jobs by 2030 (about 15% of its global workforce), on top of 50,000 already announced. Four German plants – Hanover, Emden, Zwickau, and Audi's Neckarsulm – are at risk of closure. The company also plans to cut its global model lineup by about 50% by 2035 and reduce annual capacity from 10 million to 9 million vehicles. In China, plants in Nanjing, Ningbo, and Urumqi have already been closed, while plants in Anting and Changchun are scaling back.
Volkswagen has also shifted product development authority to China. Its largest R&D center outside Germany, Volkswagen (China) Technology Co., in Hefei, has received 3.5 billion euros in investment and employs over 3,000 technical experts. With joint ventures, the company's total R&D staff in China exceeds 7,000, with full capability for vehicle development, architecture, batteries, electronics, software, and testing.
Despite the drastic measures, Volkswagen's situation remains precarious. CEO Oliver Blume said in August that the group's position is "precarious" and that the German auto industry is experiencing its "most severe upheaval" ever. The company was removed from the Euro Stoxx 50 index in September 2026, and its share price has fallen more than 75% from its 2021 peak.
