Mass job cuts loom at VW as profits fall steeply on China sales slump

A 9.5% Profit Drop and a Forecast Reversed

Volkswagen's second-quarter operating profit fell 9.5% to €3.5bn, missing analyst expectations of a modest rise to €3.9bn. The shortfall forced management to reverse its full-year revenue forecast, now projecting sales revenue to decline by up to 3% in 2026, against a previous expectation of a 3% rise on last year's €321.9bn. The global picture is mixed: deliveries dropped 6.3% to roughly 4.1m vehicles in the first half, with Europe and North America showing growth while China collapsed. The fact that VW still managed to grow in the West, yet saw group profits shrink, captures how steeply China is dragging on the world's second-largest automaker.

The China problem is the dominant variable. Volkswagen's sales in the country fell more than 31% in the first half, a collapse that Russ Mould, investment director at AJ Bell, said "laid bare" the squeeze Western carmakers are facing from domestic Chinese operators. CEO Oliver Blume added that Chinese manufacturers had sharply stepped up exports, piling further pressure on European pricing. VW is now caught between a shrinking share of the world's largest car market and an incoming wave of low-cost Chinese imports at home, a one-two punch that explains why cost cuts have moved from contingency plan to corporate survival mode.

The 100,000-Job Question

VW is targeting the elimination of up to 100,000 roles, double the number previously agreed with unions, with the additional cuts concentrated in administrative positions across its global operations. The company also plans to shrink its model line by up to half and sell non-core assets. Restructuring of this scale is unusual even for an automaker in cyclical trouble; it signals management's view that the underlying cost base is structurally misaligned with the new competitive landscape, not just temporarily pressured.

The plan is already meeting resistance. Earlier this month, the supervisory board rejected Blume's proposal to shut four German plants, an early indication that the politically powerful works councils will not accept the most visible symbol of decline, factory closures, even as headcount reductions are pushed through. Mould noted that whether the measures are "enough to win over the market is an open question," noting the share price has fallen 1.5% on the news and is down 66% over five years. Blume himself is now under mounting pressure after nearly four years in the role, making internal politics as important as external competition in determining outcomes.

Echoes Beyond Wolfsburg

Volkswagen is not alone. BMW cut its full-year profit guidance last month, citing the Iran war's disruption alongside its own China struggles, evidence that the pressure on European premium automakers is broad-based. Across Germany, the industry has been warning of a "job collapse" unless bold policy decisions address the Chinese threat. That makes VW's restructuring a bellwether, not an isolated case: how the company negotiates with unions, how regulators respond on trade, and how fast EVs can be profitably scaled will shape the European auto sector for the rest of the decade. With more than 650,000 employees across Audi, Bentley, Skoda, Seat, Porsche and Cupra, the stakes extend well beyond one company's earnings report.