Volkswagen Group is preparing to eliminate up to 140,000 positions worldwide, with subsidiary Porsche separately planning to cut an additional 5,000 to 6,000 jobs by 2035, according to internal memos and German media reports. The combined reductions would represent the deepest restructuring in the company’s history, driven by a cost base that management says is 20 per cent higher than competitors and a collapse in its once-lucrative China business, where annual sales have fallen from 4.3 million units in 2019 to below 2 million.

The group’s electric-vehicle transition has stalled. In China, it sold just 115,000 battery-electric cars last year against an internal target of one million. Porsche, long the group’s profit engine, saw margins shrink to 1.1 per cent, down from comfortable double digits, as Chinese demand weakened and tariff disputes disrupted trade. The parent company has already committed to cutting 50,000 jobs, but Chief Executive Oliver Blume has told employees that another 50,000 may be needed, and a further 40,000 positions are at risk from the possible closure of four German plants after 2030.

The restructuring is encountering fierce political resistance. The state of Lower Saxony, which holds a 20.2 per cent stake and a blocking minority under the so-called VW law, has declared that plant closures are “no future strategy.” Together with the IG Metall union, it has forced management to seek alternatives. One proposal—to repurpose the threatened Osnabrück plant for manufacturing components of Israel’s Iron Dome missile-defence system—was vetoed by Qatar, VW’s third-largest shareholder, because of Doha’s ties to Hamas. The episode illustrates the gridlock created by a shareholder structure that mixes regional politicians, a powerful union, and a geopolitically active sovereign wealth fund.

The crisis is reverberating across the European automotive sector. Volkswagen, Stellantis, and Mercedes have jointly petitioned the European Commission to open state-aid rules to production-based subsidies for clean technologies, a policy reversal that officials in Brussels view as a response to the rapid inroads made by Chinese manufacturers. In Germany, car ownership has reached a record 593 vehicles per 1,000 inhabitants, but the market is tilting toward electric models, and surveys show 80 per cent of German buyers would consider a Chinese EV. This domestic saturation and foreign competition are squeezing Europe’s legacy automakers.

The next milestones come quickly. Porsche’s supervisory board has endorsed a restructuring plan and will present details to employees on 27 July. VW’s board continues to debate plant closures and job cuts, while the EU considers the industry’s aid request. Any durable solution, analysts in Frankfurt note, will require either a revision of the VW law to dilute state influence or a negotiated compromise that unions and the Lower Saxony government have so far refused to countenance.