Inside Volkswagen’s Plan to Halve Its Model Range by 2035

Volkswagen has told employees that the company is in a “more than critical” situation as it prepares what CEO Oliver Blume describes as the largest transformation in the carmaker’s history. After a July supervisory board meeting, the group confirmed it plans to reduce its global model range by roughly half by 2035.

German tabloid Bild reported that the overhaul could involve up to 120,000 job losses and the possible closure of four German plants: Emden, Hanover, Zwickau and Audi’s Neckarsulm site. Volkswagen employed about 663,000 people worldwide at the end of last year. The figure has not been confirmed by the company, and Blume is due to defend the plan at nine works meetings across German factories starting Tuesday.

Blume pointed to geopolitics, trade barriers, regulation, weak markets, US tariffs and competition from Chinese manufacturers as the forces behind the cuts. He also acknowledged that Volkswagen’s overhead costs remain more than 30 percent higher than at comparable companies.

The financial pressure is visible in the latest results: net profit fell more than 30 percent to €3.1 billion, while operating profit dropped almost 12 percent to €5.9 billion. Škoda Auto, part of the Volkswagen group, said the restructuring plan has no direct impact on its activities. The Czech brand’s first-half operating profit rose about 6 percent to nearly €1.4 billion.

What the Overhaul Means for VW, Its German Plants and Škoda

Germany carries the immediate cost of the turnaround

The reported closures concentrate in Germany: Emden, Hanover, Zwickau and Audi’s Neckarsulm plant. That is consistent with Blume’s admission that Volkswagen’s overhead costs remain more than 30 percent above comparable firms. In the German system, plant-level reductions must be negotiated with works councils, which is why the nine works meetings beginning Tuesday are more than an internal briefing—they are the first test of whether management can convert the “more than critical” message into consent.

The 30 percent cost gap is the engine of the plan

Volkswagen’s net profit fell by more than 30 percent to €3.1 billion and operating profit by almost 12 percent to €5.9 billion. Against that, Blume’s cost-gap disclosure gives the restructuring a concrete benchmark. Halving the model range by 2035 is intended to simplify production and procurement, but the reported plant closures would be the main tool for closing the gap.

Where Škoda stands

Škoda’s first-half operating profit rose around 6 percent to nearly €1.4 billion, and the Czech brand says the plan has no direct impact on its activities. That protects its 36,500 workers for now. The longer-term question is indirect: a group-wide halving of the model range will eventually touch shared platforms, components and production allocation, even if no Škoda plant is named in the current report.

What the crisis says about Europe’s car market

Blume cited geopolitics, trade barriers, regulation, weak markets, US tariffs and Chinese manufacturers as simultaneous pressures. The restructuring is therefore not only a response to internal cost bloat; it is Volkswagen preparing for a European market with more regulatory demands, tougher cost competition and less room for marginal models.

Next Moves for Volkswagen, Suppliers and Škoda Workers

  • Volkswagen management should publish site-specific criteria for the reported Emden, Hanover, Zwickau and Neckarsulm closures before the nine plant meetings conclude, because Bild’s list has already made specific plant decisions central to the discussions.
  • Works councils at those four named plants should demand written guarantees or transition plans tied to the 2035 model-range target before agreeing to productivity measures, since the company has so far confirmed only the model reduction, not the job number.
  • Suppliers should identify contracts linked to the half of the model range that will be discontinued by 2035 and renegotiate capacity commitments, because model elimination will change volumes long before any plant formally closes.
  • Investors should hold management to the €5.9 billion operating profit baseline and ask what portion of the 30 percent overhead gap closure comes from plant closures versus model simplification, because the plan’s financial case depends on that split.
  • Škoda’s 36,500 employees should treat the “no direct impact” statement as limited to the current restructuring wave and seek a group product-allocation commitment, because the 2035 model halving creates long-term platform risk.

Risk & Opportunity Assessment

Commercial RiskHighNet profit fell more than 30 percent to €3.1 billion and operating profit fell almost 12 percent to €5.9 billion, while Blume says overhead costs are more than 30 percent higher than comparable companies and Bild reports up to 120,000 potential job cuts.
Competitive RiskHighBlume cites tough competition and the rise of Chinese manufacturers, alongside US tariffs and weak markets, reducing room for the current model range.
Regulatory RiskMediumTrade barriers and US tariffs are named pressures, but the article does not detail new regulation beyond existing constraints.
Reputation RiskHighEmployees were told the situation is “more than critical”; the media report of four plant closures and 120,000 job losses raises political and labour-relations risk as Blume begins nine works meetings.
Technology DisruptionMediumThe planned 50 percent model-range cut and competitive pressure from Chinese manufacturers reflect a shift in technology and production economics, but the article does not isolate a specific technology.
Commercial OpportunityMediumHalving the model range by 2035 and closing high-cost plants could close the 30 percent overhead gap, while Škoda’s 6 percent operating profit growth shows a profitable model inside the group.