Fuso Motors | Plans to cut half its vehicle models, actively slimming down to compete with Chinese automakers

Facing fierce competition from Chinese automakers, German automaker Volkswagen on Thursday (the 9th) announced it will cut up to half of its vehicle models to reduce costs and improve its ability to compete with Chinese companies.

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After a meeting of the supervisory board, Volkswagen said it will gradually cut up to half of its vehicle models, aiming to focus efforts on developing the most attractive niche markets. The company’s production capacity is expected to decline from the current 10 million vehicles per year, down 10% to 9 million, far below the 12 million target set before the outbreak of the COVID-19 pandemic. CEO Oliver Blume said global conditions have continued to deteriorate over the past 12 months, so the company must take action.

Reuters, citing sources, said Blume is considering closing four factories in Germany and cutting up to 100k jobs—double the number of planned layoffs—and this would become the largest restructuring in the company’s history.

The global auto market is shifting from internal-combustion vehicles to electric vehicles, overturning the operating model of many long-established European automakers. Volkswagen is under unprecedented pressure, including high domestic costs and an overcapacity problem, intense competition from Chinese automakers, and US import tariffs, which have cut its profit margins for 2021 to 2025 in half.

According to information on Volkswagen’s official website, the company has 111 production sites across major continents except Australia and Antarctica. Its brands include Audi, Porsche, Škoda, Lamborghini, and Bentley. Meanwhile, some of Volkswagen’s brands have vehicle models that are very similar, differing only slightly in design and function—prompting the company to streamline and simplify its structure to lower development costs.

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In addition, Chinese automakers have, for many years, focused on developing and producing electric vehicles, gaining strong competitive advantages in the related markets.

And for years, most of Volkswagen’s profits have come from car sales in the Chinese market, and it was even the top-selling automaker brand in China at one point. However, in recent years its sales in China have been falling steadily, and its sales in the first quarter this year dropped by another 20%.

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