Electrive.com — 2026-04-21
Automotive Industry
At Volkswagen, underutilised and costly plants in Europe are under scrutiny. CEO Oliver Blume plans to cut overcapacity in China and Europe, while aiming to avoid plant closures in Germany through 'intelligent' measures.
Oliver Blume describes 2019 as the last year in a predictable market environment before the Covid crisis. At that time, Volkswagen sold around eleven million vehicles globally across all its brands, Blume told the German Manager Magazin during an interview. The group had built capacity for approximately twelve million units per year, which, on average, resulted in a solid utilisation rate, although differences between individual plants remained.
Since the Covid crisis, however, Volkswagen’s annual sales have declined to around nine million vehicles in significantly changed market conditions. According to current plans, the group now needs to reduce costs by 20 per cent.
“Tariffs in the USA, immense competitive pressure in China, the shrinking European market, and now the war in the Middle East. Who knows what will come next,” Blume said in the interview. “These developments are not simply passing. This is the new normal. And we will rise to meet it.”
Regarding its products, Blume considers Volkswagen to be highly competitive. However, the recent operating profit margin of 2.8 per cent is not sufficient to finance major investments from the company’s own resources. Blume therefore plans to tackle costs in order to make the group more resilient and better positioned in a challenging environment, even in a scenario of low market growth.
In concrete terms, the imbalance is clear: with sales of around nine million vehicles and production capacity for twelve million, Volkswagen is facing significant and costly overcapacity.
“Overcapacities are not sustainable for our company in the long term. And in today’s market and competitive landscape, the volume planning of the past is unrealistic,” Blume said. In China, the carmaker already reduced the capacity by one million vehicles, and in Europe, VW and Audi are set to cut another million.
Emden and Zwickau operate on just one line
While Blume does not name specific sites at risk in the interview, nor differentiate between combustion and battery-electric production, overcapacity within Volkswagen is well known in the industry. This applies not only to the Wolfsburg headquarters, but also to the battery-electric vehicle plants in Emden and Zwickau, which are not operating at full capacity.
Although plans from late 2024 have already been adjusted, Zwickau is expected to produce just one battery-electric model in the future. Previously, even five model lines from different group brands were not sufficient to fully utilise the site. A similar picture emerges at Volkswagen Commercial Vehicles in Hanover, where the remaining models – the Volkswagen ID. Buzz and the Volkswagen T7 Multivan – are also unable to fully utilise the plant.
“In Germany, we are currently reducing factory costs together with the works council – and making progress unlike anything previously seen at Volkswagen,” Blume said. “Nevertheless, we continue to be burdened by excessive capacities, which ultimately cost a lot of money. We need to find a suitable way to address this.”
He aims to avoid plant closures and cites the example of Osnabrück, where VW vehicle production is set to end as planned, but the site itself will be retained.
“We are negotiating with companies in the defence industry that could use this plant and retain the workforce. That is what I mean by intelligent. We must develop pathways to reduce our own overcapacities in a similar manner.”
Blume does not rule out selling a plant to a Chinese competitor seeking to expand into Europe and avoid EU tariffs through local production. However, he tempers expectations for such a deal. VW’s plants are considered expensive due to their utilisation rates and collective bargaining agreements – and for Chinese companies, ‘factory costs are, of course, highly relevant.’
VW also plans to cut costs by reducing the number of models. Globally, the German group currently offers around 150 different models. According to Blume, this number is expected to fall to less than 100 in the future.
“We need to plan this strategically across brands, regions, and segments. For powertrains, we will align with regional markets. For equipment variants, we will focus our offering even more,” the VW CEO explained.
These and numerous other measures are aimed at improving profitability at Volkswagen – from the current level of 2.8 per cent to an ambition range of 8 to 10 per cent by 2030, as outlined by Oliver Blume. He emphasises that, given the current challenges, this target is significantly more demanding than previous results and goals, but also necessary in light of the high-risk environment.