Volkswagen AG (ETR:VOWG) will continue its aggressive restructuring despite the growth of its order book, as the largest European car manufacturer seeks to protect its margin from high costs in the domestic market. CEO Oliver Blume told Bild am Sonntag that the group is implementing "clear target cost metrics" across its global manufacturing network, which encompasses Germany, Europe, and China.
The strategy aims to eliminate costly excess capacity and restructure the company's industrial presence in a rapidly fragmenting global market, where traditional export models from Germany are showing diminishing returns.
Eliminating the structural cost gap in the domestic market
A central element of the recovery remains the reduction of approximately 50,000 jobs in Germany by 2030—a step that Blume defends as a necessary compensation for high domestic labor and energy costs. The CEO noted that the previous reliance on car manufacturing in Germany for global exports has become unsustainable as regional economic dynamics change.
To counter the current challenges, the group is intensifying its focus on productivity growth, striving to optimize operations in the domestic market, which is currently burdened, according to Blume, by excessive regulation and uncompetitive energy prices.
Overcoming margin pressure and global competition
The urgency of restructuring is underscored by Volkswagen AG's cautious financial forecast: the company predicts an operating margin of only 4% this year. The forecast reflects the cumulative impact of large investments in electric vehicle (EV) platforms and increasing competition from cheaper Chinese manufacturers.
While the group navigates these challenges, the strict application of cost targets for specific plants is intended to ensure discipline in capital expenditures and their alignment with localized demand models.
The transition marks a significant shift towards a more decentralized production model. Since the traditional growth strategy focused on exports is no longer viable, the success of the current restructuring will depend on the group's ability to lower the breakeven point while also protecting its market share in the increasingly crowded electric vehicle sector.
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