Volkswagen's net profit fell 32.9 percent in the second quarter to €1.54 billion, the group reported on Friday, as vehicle deliveries in China tumbled by almost a third and restructuring charges mounted. Operating profit dropped 9.5 percent to €3.5 billion, missing analyst expectations, while group revenue remained broadly flat. The carmaker also revised its full-year revenue guidance, now forecasting a decline of up to 3 percent rather than the previously expected growth.

The sharp deterioration stems chiefly from a structural loss of share in the Chinese market, where Volkswagen’s first-half deliveries slumped 31.6 percent. Local manufacturers such as BYD, Geely and Chery have eroded its dominance by offering aggressively priced electric and hybrid models, and are now exporting that competitive pressure to Europe, where Chinese brands captured 11 percent of the market in May. A €500 million charge for halting US production of the electric ID.4 and an unfavourable product mix further weighed on margins.

In response, chief executive Oliver Blume has proposed doubling the group’s job-cut target to 100,000 roles worldwide and closing four German plants—Emden, Hanover, Zwickau and Neckarsulm—from the 2030s. The plan has met stiff resistance from labour representatives and the state of Lower Saxony, which together hold a majority on the supervisory board and blocked the proposal earlier this month. With more than 37,000 employees already signed up to voluntary departure schemes under a previous deal that prohibited compulsory redundancies until the end of the decade, the new demands set the stage for a protracted standoff.

Blume warned that the group faces “an unprecedented risk scenario” and said talks with employee representatives are continuing. Wolfgang Porsche and other family shareholders are said to back a tougher line on costs. Analysts in Frankfurt broadly regard the current margin of around 4 per cent as unsustainable if investment in electrification and software is to be maintained. The next test will be whether management can win approval for plant closures in the coming months, or whether a compromise on further voluntary cuts and wage restraint will be sought when negotiations resume after the summer break.