Volkswagen Targets 20 Percent Cost Reduction by 2028 Amid Global Market Pressures
Volkswagen is preparing a broad cost reduction strategy aimed at cutting expenses by 20 percent across all its brands by the end of 2028, according to German business media reports, as Europe’s largest automaker seeks to navigate mounting global challenges including weaker demand in China and rising geopolitical tensions.
Senior executives, including Chief Executive Oliver Blume and Chief Financial Officer Arno Antlitz, reportedly outlined the savings framework during a high level internal meeting in Berlin earlier this year. The plan is described as a substantial efficiency drive designed to strengthen the group’s financial resilience in a period marked by higher input costs, slower growth in key markets and the continued impact of US trade measures.
Volkswagen has been operating under a group wide performance programme for several years, which the company says has already delivered savings in the double digit billion euro range. Management argues that these efforts have helped cushion the effect of geopolitical headwinds, including tariffs and supply chain disruptions. However, intensifying competition in China, particularly from domestic electric vehicle manufacturers, has added new pressure on profitability.
The Chinese market, once a consistent growth engine for German automakers, has become increasingly competitive as local brands expand rapidly in electric mobility and digital integration. Price competition and evolving consumer preferences have affected margins, prompting European manufacturers to reassess cost structures and production strategies. For Volkswagen, which maintains extensive joint ventures and manufacturing operations in China, the challenge is both commercial and strategic.
While detailed measures behind the proposed 20 percent reduction have not been fully disclosed, reports suggest that operational efficiencies, closer cooperation among brands and potential restructuring options are being evaluated. Speculation has included possible adjustments to production footprints, though company representatives have emphasised that previous agreements with labour representatives include commitments aimed at protecting jobs and avoiding plant closures for operational reasons.
The group’s works council leadership has pointed to a competitiveness pact reached in late 2024, which set out measures intended to balance cost discipline with social responsibility. That agreement was designed to ensure that workforce adjustments, if required, would be managed through negotiated and socially acceptable pathways rather than abrupt layoffs.
In parallel with the savings push, Volkswagen continues to invest heavily in electrification, software development and digital platforms. The company faces the dual task of financing next generation vehicle technologies while maintaining profitability in traditional combustion engine segments during the transition period. Capital allocation discipline is therefore expected to play a central role in achieving the targeted cost base reduction.
The broader European automotive sector is undergoing similar recalibrations as manufacturers respond to shifting trade dynamics, regulatory demands and rapid technological change. Volkswagen’s long term competitiveness strategy will likely hinge on its ability to streamline operations while preserving innovation capacity in a rapidly transforming global market.
