VW in deep trouble – with the biggest shift in history planned
Volkswagen is considering the biggest restructuring in automotive industry history, with reports indicating that the German carmaker could close four factories and cut as many as 100,000 jobs worldwide.
This comes as the German automaker battles mounting pressure from Chinese competitors, weak demand in Europe, and US import tariffs.
Reuters reported that Volkswagen’s supervisory board has been informed that the company is considering closing factories in Hanover, Zwickau, Emden and Audi’s Neckarsulm plant.
More than 45,000 jobs would be at risk from those closures, adding to around 50,000 job cuts already planned.
If implemented, the restructuring would be the biggest shift in automotive history, surpassing General Motors’ restructuring during its 2009 bankruptcy.
Volkswagen CEO Oliver Blume reportedly presented the proposals to senior executives ahead of a supervisory board meeting scheduled for 9 July, where the plans are expected to be discussed.
The overhaul comes as Volkswagen struggles with slowing vehicle demand in Europe, falling sales in China and rising competition from Chinese manufacturers, while also dealing with the impact of US tariffs on imported vehicles.
Investors have reacted cautiously, with Volkswagen’s shares trading at their lowest level in 16 years following the reports.
Volkswagen has declined to comment on what it described as confidential documents, but acknowledged that “the entire group, including its brands and subsidiaries, must undergo far-reaching change.”
The proposals are expected to face fierce opposition from labour unions and the German state of Lower Saxony, Volkswagen’s second-largest shareholder.
Previous attempts by Blume to close German factories in 2024 were abandoned after strikes and resistance from unions.
The reported restructuring has also raised questions about what it could mean for South Africa’s automotive industry, where Volkswagen remains one of the country’s largest vehicle manufacturers.
National Association of Automotive Component and Allied Manufacturers (NAACAM) CEO Renai Moothilal said that it was still too early to comment on the reported job cuts until Volkswagen officially confirms the plans.
South Africa must make sure that the opportunity is not lost
However, in an interview with The Money Show, he said the reports reflect broader structural changes taking place across the global automotive industry.
“We’ve been seeing this trend of the South African market being penetrated by imports, particularly those coming from the Asian economies, China and India in particular,” said Moothilal.
“It’s been a very strong trend over the last two years or so, to the extent that now you’ve got Chinese brands accounting for almost 17% of the South African market. And we expect that import dominance to continue in the short term.”
He warned that these trends create uncertainty for an industry that supports hundreds of thousands of South African jobs.
“Besides the more than 100,000 direct jobs in manufacturing, you’ve probably got another 300,000-plus jobs in the retail and aftermarket sales and service space,” he said.
Moothilal noted that South Africa’s automotive market differs from Europe because electric vehicles have not yet achieved the same level of market penetration.
“I do think for South Africa, it is slightly nuanced in that our market has not become fully electrified or penetrated by electric vehicles in the same way as you find in some of the global markets like the EU,” he said.
“It will probably be some time before we see that kind of dominance of electric vehicles on our roads.”
Instead, he believes one of the biggest threats to local component manufacturers is the growing number of imported vehicles arriving with their own replacement parts.
“The one concern that we have from the parts and components side of things is that even these imported brands, whether they’re hybrids or internal combustion engine vehicles, are coming in with their own stock of imported replacement components,” he said.
“That’s eroding the market share and employment potential of the South African manufacturing base.”
Despite these risks, Moothilal said the changing global automotive landscape could also create opportunities if South Africa moves quickly to attract investment from emerging manufacturers.
“South Africa is well-positioned to partner with a lot of these emerging brands, particularly the Chinese new energy vehicle producers, to produce a lot of those components here in South Africa,” he said.
“I think that’s the challenge and the opportunity that we as leaders, policymakers, influencers and shapers need to very quickly grapple with and find ways of ensuring that those partnerships happen.”
Moothilal added that South Africa’s gradual approach to electrification may now be working in its favour because the government has not committed to supporting only one drivetrain technology.
“The fact that we haven’t jumped out of the gates and tried to completely shape our market in one particular way is probably an advantage right now,” he said.
He added that growing sales by Chinese brands are already encouraging them to consider manufacturing locally.
“What we’re starting to see is these brands looking for alternate markets, and South Africa hasn’t been any different,” he said.
“The positive is that, as their volumes increase, Chinese manufacturers are showing more interest in producing domestically.”
“The challenge for us as industry leadership is to make sure that opportunity is not lost. In attracting and helping them settle down in terms of manufacturing, we need to make sure that as much of their production is being done in South Africa and not coming in containers from China.”
Loading ...