Just a few years ago, the Volkswagen Group looked unstoppable.
In 2019, the German auto giant sold nearly 11 million vehicles globally and was reportedly preparing for an even bigger push toward 12 million annual sales. Then the global market changed, and those ambitions quickly fell apart.
Since 2020, Volkswagen Group hasn’t managed to crack 10 million annual sales again.
Now, the company is preparing to slash production capacity by another one million vehicles per year as pressure continues to build from multiple directions.
Volkswagen Says The Old Growth Model No Longer Works
Speaking with Manager Magazin, CEO Oliver Blume admitted the company’s old production targets no longer make sense.
Volkswagen built massive global production capacity when it expected demand to keep climbing.
That demand never fully returned.
Blume reportedly said the company’s old volume goals are now unrealistic, especially with shrinking demand in Europe and rising competition elsewhere.
China Has Become A Major Problem
China used to be one of Volkswagen’s biggest growth engines.
Now it’s become one of its toughest markets.
Domestic Chinese automakers continue to gain ground, particularly in the EV segment, where companies like BYD have become increasingly dominant.
Volkswagen has struggled to keep pace as Chinese buyers shift toward cheaper, more tech-focused local brands.
That pressure is forcing the company to rethink how much production capacity it actually needs in the region.
Tariffs Aren’t Helping Either
Volkswagen has also been hit by trade problems.
According to reports, U.S. tariffs reportedly cost the company around $1.5 billion during the first half of 2025.
That’s a massive financial hit at a time when the company is already trying to cut costs.
Blume also pointed to broader geopolitical instability, including conflicts in the Middle East, as another source of uncertainty.
Factory Closures Could Still Happen
Volkswagen has already spent the last two years trying to reduce costs.
In 2024, reports suggested the company was considering shutting down multiple German factories, triggering major pushback from labor unions.
Now the company says it wants to avoid plant closures, but nothing appears completely off the table.
Blume has even suggested selling certain factories to Chinese automakers could be an option.
The Auto Industry Is Changing Fast
Volkswagen’s situation shows how quickly the global car market has shifted.
Legacy automakers spent decades scaling production around predictable demand growth.
That world no longer exists.
Now, even one of the world’s biggest automakers is being forced to shrink just to stay competitive.