VolkswagenPlans1MillionVehicleCapacityCutinChinaandEurope

Volkswagen Group plans to cut global production capacity by 1 million vehicles across China and Europe and reduce its vehicle lineup by as much as 50%, part of a broad restructuring aimed at improving efficiency and profitability.

The overhaul highlights the mounting pressure on the German automaker as it contends with geopolitical tensions, tighter regulations and intensifying competition from Chinese carmakers that are eroding its market share in China and Europe.

Management presented the plan Thursday at a closed-door supervisory board meeting in Germany. The strategy is intended to refocus Volkswagen on its core business and strengthen its resilience against external shocks and risks.

Under the plan, Volkswagen aims to lower its annual global production capacity to 9 million vehicles. Before the pandemic, the company had targeted capacity of 12 million vehicles, but it has already cut 2 million units. The latest reductions will focus on plants in China and Europe.

Volkswagen also plans to reduce complexity and lift margins by concentrating on higher-potential premium segments. The company intends to cut optional features by as much as 75% and consolidate research and development across platforms, electrical architectures and software systems to eliminate duplicated technologies

The capacity-cutting plan has drawn widespread attention. Ahead of the supervisory board meeting, German magazine Manager Magazin reported that Volkswagen was considering closing four domestic plants and laying off as many as 100,000 employees globally. Volkswagen’s official announcement did not mention specific plant closures or job cuts, but workers staged protests at several German factories Thursday. As of publication, the company had not announced detailed capacity-reduction or layoff plans.

Volkswagen’s works council publication said works council chief Daniela Cavallo had urged Volkswagen Group Chief Executive Oliver Blume to respond clearly by Friday to rumors of plant closures and layoffs, warning that employees’ patience had worn thin.

The governor of Lower Saxony, one of Volkswagen’s major shareholders, said after the meeting that discussions had been intense and that management had presented a comprehensive package of measures. Difficult work lies ahead, he said, adding that the timing of implementation remains uncertain and that plant closures aren’t a long-term solution.

The governor, who previously suggested Volkswagen could build China-developed models at its German plants, said the company must find a sustainable path forward for its domestic production bases.

Volkswagen is struggling with low capacity utilization in both China and Europe. A Boston Consulting Group study found that the ideal utilization rate for European auto plants is about 80%, while Volkswagen’s rate stands at just 59%.

China, Volkswagen’s most important overseas market, has become a particular challenge. At its 2019 peak, the company sold 4.23 million vehicles in the country, against total capacity of more than 5 million units. By 2025, sales had fallen to 2.69 million vehicles.

The decline deepened in 2026. Volkswagen’s China sales fell 14.8% year over year in the first quarter to 549,000 vehicles. With sales of traditional combustion-engine vehicles weakening sharply in the second quarter, the decline could widen. SAIC Volkswagen Automotive Co. Ltd., one of the company’s main Chinese joint ventures, reported a 31.2% year-over-year drop in first-half sales.

At the same time, Chinese domestic brands are taking market share from Volkswagen in China and pushing further into Europe. According to market research firm Dataforce, Chinese brands captured 10.7% of Europe’s auto market in May 2026.

Contact editor Han Wei (weihan@caixin.com)