The keys to understanding the Volkswagen crisis

BarcelonaThe Volkswagen Group is experiencing a severe crisis and is preparing to transform itself. Europe's leading car manufacturer convened the twenty members of its supervisory board this Thursday to discuss the restructuring plan designed by the company's CEO, Oliver Blume. Although the details discussed at the meeting are still unknown, according to a statement from the group, its plans include halving the range of its models. Currently, across all brands, Volkswagen's vehicle range is configured with around 150 models.

Furthermore, in the restructuring designed by the company, its annual production capacity is also planned to be reduced to 9 million vehicles, down from the current capacity of up to 12 million. In this way, the company would seek to "adapt to the global market situation and the increase in competition." However, the group's supervisory board did not reach any agreement on how these cuts should be distributed. A few weeks ago, the German media outlet Manager Magazine reported that the plan would involve a reduction of up to 100,000 jobs.

But, precisely, what has brought the company to this situation?

Chinese competition

"As the saying goes, Volkswagen put China on four wheels," explain group sources to ARA. Historically, the group has been very strong in China, but its position in the Asian market is currently being reversed at full speed. In fact, during the first half of 2026, its sales in China fell by 25.9%, after a series of Chinese firms emerged that compete with them. This decline was the group's main drag during the start of the year, which globally sold 6.3% fewer vehicles than last year.

And this strong competition is also reaching Europe. Little by little, Chinese brands – such as BYD, Omoda or MG – are entering more markets thanks to their low costs and good performance. It is difficult for European industry to match their efficiency to reduce manufacturing costs.

An oversized company

Around the world, the Volkswagen Group has 111 production plants distributed in 26 countries – 16 of which are in Europe. Now, with a completely changing context, Volkswagen fears that the plants will end up not being profitable. In fact, according to data from Mobility Global collected by Reuters, it is estimated that its German factories, although in 2026 they will operate at 81% of their standard capacity, will fall in the next five years to 73%.

Regarding the volume of workers, the group currently has more than 650,000 employees. Thus, in case of 100,000 jobs being cut, the impact would affect 15% of the global workforce.

Electrification

Another major change in the sector that has fully impacted the group's ecosystem has been the electrification of vehicles. Although in recent months the trend towards electric vehicles has been increasing, the wait has been long for vehicle manufacturers. Furthermore, making electric cars involves transformations in the production line, such as fewer jobs. As explained to ARA by union sources, this step towards electric also poses a great challenge for Volkswagen, as the costs of producing its batteries are currently above those of many of its competitors.

It should be remembered that the Volkswagen group also experienced a strong reputational crisis due to Dieselgate, a fraud with which the gas emission measurements in cars were manipulated.

Seat and Cupra

And in this context, in what position are Seat and Cupra, the group's two Catalan brands? In two totally different ones. Seat has not presented a new model for more than seven years and currently its range of vehicles is limited to three: the Ibiza, the Leon and the Arona. On the other hand, Cupra has become the group's great bet for Martorell and, in fact, just a few weeks ago it launched a new model, the Raval.