The German group Volkswagen has announced that it will reduce the number of models it produces by up to 50% in an extensive restructuring plan aimed at cutting costs and facing the increasingly strong competition from Chinese electric car manufacturers.
The decision comes amid declining sales and decreasing profits, writes New York Times.
Volkswagen presented the plan after a Supervisory Board meeting, without specifying the impact it will have on employees, considering that the German press recently reported that the group could lay off up to 100,000 people by the end of the decade and may close four factories in Europe.
The company's CEO, Oliver Blume, stated that Volkswagen needs to eliminate excess production capacity and adapt to the rapid changes in the automotive industry.
"The geopolitical situation has become critical in the last 12 months," said Blume. "The next years will determine who will play a decisive role in the automotive industry."
The company aims to produce approximately 9 million cars per year, compared to the pre-Covid-19 pandemic target of 12 million and the recent 10 million.
Analysts believe that this measure is an implicit recognition that Volkswagen has become too large and too complex to cope with the accelerated transition to electric cars and competition from China.
The German group currently has 111 production units worldwide and controls brands such as Audi, Porsche, Skoda, Lamborghini, and Bentley.
Over the years, the company has ended up selling numerous very similar models under different brands, which has increased production costs and complexity.
The financial results reflect the challenges faced by the automaker. Volkswagen's profit dropped by 28% in the first quarter of the year, to 1.6 billion euros, and sales were 2% lower than in the same period last year.
Also hit hard is the Porsche brand, one of the main profit generators of the group, affected by the 25% tariffs imposed by US President Donald Trump on imported cars to the United States.
Volkswagen is also experiencing a significant drop in sales in China, a market that has brought a large part of its profits for years. In the first quarter, the company's deliveries in the Chinese market dropped by 20%, after several consecutive years of decline.
At the same time, Chinese manufacturers such as BYD and Geely are rapidly gaining ground in Europe, offering cheaper and better-equipped electric cars.
According to industry data cited by the New York Times, in May, Chinese manufacturers sold more cars in the European Union and the United Kingdom than Japanese manufacturers.
The restructuring plans have raised concerns in Germany, where the automotive industry is one of the pillars of the economy.
Chancellor Friedrich Merz's government is trying to support the sector through subsidies and by relaxing some European regulations to help German manufacturers cope with the competition from China. Officials in Berlin have stated that the objective is to avoid the closure of factories in Germany.