Volkswagen is struggling to keep up as buyers shift to EVs. CEO of VW brand cars, Thomas Shafer, warned, “We are no longer competitive,” after announcing additional job cuts Monday.
VW plans job cuts to keep pace with EV leaders
Europe’s largest automaker aims to cut costs and improve returns to keep pace with EV leaders like Tesla.
“With many of our pre-existing structures, processes, and high costs, we are no longer competitive as the Volkswagen brand,” Shafer explained at a staff meeting Monday. According to a post on VW’s intranet reviewed by Reuters, Shafer warned high costs and low productivity were leading to uncompetitive cars.
To turn things around, the brand introduced a new cost-cutting program in June, designed to save 10 billion euros ($10.9B) by 2026.
Volkswagen Group CEO Oliver Blume aims to boost VW brand returns to 6.5% over the next three years. Currently, it’s around 3.6%.
Gunnar Kilian, member of the HR board, said VW would take advantage of the “demographic curve” to reduce staff, including offering early or partial retirement.
“We need to finally be brave and honest enough to throw things overboard that are being duplicated within the company or are simply ballast we don’t need for good results,” Kilian explained.
Meanwhile, most of the savings will come outside of the job cuts. According to Kilian, VW will outline further details by the end of the year.
Shafer issued a “final wake-up call” this summer, calling for a short-term spending freeze to contain costs. The brand leader explained, “We are letting the costs run too high in many years.”
The job cuts are the latest as the automaker struggles to keep up as the industry shifts to EVs. With VW brand EV orders falling in Europe, the company has already cut production at several German plants.
Earlier this month, VW cut a shift and paused production at its Zwickau plant, citing a lack of electric motors.
Higher inflation and interest rates, in addition to the end of EV subsidies in Germany, have put VW in a tough situation. The company is also facing increased pressure from EV market leaders Tesla and BYD, taking market share in its biggest markets.
Despite VW claiming demand for EVs is falling, Tesla’s Model Y is on track to be the best-selling vehicle in Europe this year.