VW profit drops on China slump, 100,000 job cuts loom
Volkswagen is doubling its job cut targets to 100,000 and slashing its revenue forecast as a severe sales collapse in China exposes Europe's vulnerability to cheap electric vehicle imports.
Volkswagen has posted a 9.5% drop in second-quarter operating profit to €3.5bn, falling short of analyst expectations of €3.9bn. The company immediately reversed its annual revenue forecast, now projecting a 3% decline rather than a 3% increase on last year’s €321.9bn.
The downgrade is driven by a dramatic collapse in what was once the company's most reliable growth engine. Volkswagen’s Chinese deliveries plunged by more than 31% in the first half of the year. This dragged global sales down 6.3% to 4.1 million vehicles, offsetting solid growth in both Europe and North America.
This retreat has severe implications for the German industrial base. Chief executive Oliver Blume warned that Chinese manufacturers are now sharply increasing exports, bringing the competitive pressure directly to Europe’s doorstep. “The extent to which western carmakers are being squeezed out of the Chinese car market by domestic operators is laid bare by Volkswagen’s latest update,” said Russ Mould, investment director at AJ Bell.
To survive the margin squeeze from cheaper rivals, VW is pushing a brutal restructuring programme. The company is doubling its targeted job cuts to 100,000, focusing primarily on administrative roles across its global operations. The workforce reduction is part of a broader efficiency drive that includes cutting VW's model lineup by up to half and divesting non-core assets.
Implementing these measures will test the limits of Germany's consensus-driven corporate model. Earlier this month, VW’s supervisory board firmly rejected Blume’s proposal to shut four domestic factories. Because the manufacturer employs more than 650,000 people globally across brands like Audi, Porsche, Skoda and Seat, any large-scale reduction is a highly sensitive political issue.
Investors remain unconvinced about the timeline for a turnaround. VW shares fell 1.5% on the results and have lost 66% of their value over the past five years. “After nearly four years at the wheel as chief executive, Oliver Blume is likely to come under increasing pressure,” Mould said. “Pushing these through may be difficult given likely opposition from unions, and whether they are enough to win over the market is an open question.”
The struggles are not isolated to VW. BMW last month cut its annual profit guidance, citing both its own difficulties in the Chinese market and broader disruptions caused by the Iran war.
