Blume: Volkswagen to cut one million more units of capacity

Volkswagen plans to cut a further one million units of annual production capacity, Chief Executive Oliver Blume told Manager Magazin, taking the group’s global capacity target to nine million vehicles per year from a starting point of 12 million. “Overcapacities are not sustainable for our company in the long term,” Blume said. “And in today’s market and competitive landscape, the volume planning of the past is unrealistic.”

Clearly, Volkswagen sees its existing overcapacity issue as untenable. Last year, the automaker sold approximately nine million vehicles against capacity built for twelve million, generating an operating profit margin of just 2.8%—insufficient, Blume said, to finance major investments from internal resources. That it is seeking to cap its global production capacity at last year’s sales figures suggests it sees little opportunity for growth in the short- to medium-term. 

Instead of volumes, Volkswagen is targeting margins:  between 8%-10% by 2030, and has committed to reducing its total costs by 20%. One million units of capacity have already been cut in China, incidentally the market where it has experienced the sharpest demand decline. Another one million reduction is focused on Europe, with Audi sharing the burden alongside the Volkswagen brand. Meanwhile, North America appears to be emerging from the cuts unscathed.

Blume did not hesitate to detail exactly which pressures weighed on Volkswagen’s bottom line. “Tariffs in the USA, immense competitive pressure in China, the shrinking European market, and now the war in the Middle East,” he said. “Who knows what will come next. These developments are not simply passing. This is the new normal.”

His remarks echoed striking commentary from Hyundai Chief Executive José Muñoz earlier in April that laid bare the permanent changes to the global automotive landscape. “Globalisation is over. It’s completely over,” he remarked in response to Bloomberg questions about the impact of the Iran conflict. Geopolitical instability, paired with protectionist policies in a growing number of regions, are substantially impacting the strategies of many major players. Volkswagen has also confirmed it will hack down its global model count from approximately 150 to fewer than 100, rationalising across brands, regions, and powertrain variants.

The challenge in Europe is how to reduce capacity without closing the German plants that unions have successfully defended. The Dresden plant did close, and Osnabrück is losing vehicle production at the end of 2026—but may shift towards defence production for Israel’s Iron Dome—but Blume has been explicit that he considers outright closures a last resort. He described the Osnabrück situation in Manager Magazin as an example of an “intelligent” solution. The rumoured customer is Israeli state-owned Rafael Advanced Defence Systems; it remains to be seen whether the local works council and residents will support the potential shift. 

Electric vehicle-focused plants at Emden and Zwickau are operating well below capacity; Zwickau is expected to produce just one battery-electric model, down from  planned five lines. Blume did not rule out selling a plant to a Chinese competitor seeking European production to avoid EU tariffs, though he noted that Volkswagen’s facilities carry high costs due to utilisation rates and collective bargaining agreements. These are factors that have thus far given Chinese automakers pause and seen them instead focus on lower-cost production hubs in Hungary and Turkey.  

Ultimately, however, the restructuring will not succeed on capacity cuts alone. Blume is also pressing for regulatory relief from Berlin and Brussels on energy costs and compliance burdens that he describes as outside the company’s control, and has said the group’s old formula of developing and producing vehicles in Germany for global export “no longer works”.