Despite taking a pledge in 1994 to provide job protection and avoid layoffs till 2029, German automotive giant Volkswagen, one of the world's leading automobile manufacturers, recently announced significant job cuts.

The German automotive giant has decided to slash thousands of jobs and shut at least three factories in Germany. Reuters reported that the decision is aimed at a deeper overhaul. It also aims to address high energy and labor costs as well as global competition, including weak demand from China and high production costs at home.

According to the works council head, the management is serious about all this. “This is not saber-rattling in the collective bargaining round," Daniela Cavallo, Volkswagen's works council head was quoted as saying.

In response to the increasingly difficult economic environment facing the European automotive industry, the Volkswagen Group announced to cut jobs in Germany.

The European auto industry has been facing a shrinking market share for battery electric cars. They called for urgent action as demand for EVs declines. The European Automobile Manufacturers’ Association (ACEA) which represents the 15 major Europe-based car, van, truck, and bus makers, including Volkswagen Group,  BMW Group, DAF Trucks, Daimler Truck, Ferrari, Ford of Europe, Honda Motor Europe, Hyundai Motor Europe, Iveco Group, JLR, Mercedes-Benz, Nissan, Renault Group, Toyota Motor Europe, and Volvo Group, recently called on the EU institutions to come forward with urgent relief measures before new CO2 targets for cars and vans come into effect in 2025.

Additionally, they also urged the European Commission to bring forward the CO2 regulation reviews for light-duty and heavy-duty vehicles, currently scheduled for 2026 and 2027 respectively, to 2025.

Registration for new cars in the EU has continuously been on a downward trajectory. In September 2024, three of the region’s four major markets: France, Italy, and the German market declined by -11.1%, -10.7%, and 7%, respectively. On the other hand, Spain experienced a healthy rebound (+6.3%).

After reporting a 7% decline in third-quarter global deliveries, Volkswagen Group updated its forecast for the 2024 financial year. Now the company now expects deliveries to customers to be around 9 million vehicles (2023: 9.24 million vehicles; previous forecast: increase of up to 3 percent). Volkswagen now expects Group sales revenue to be around 320 billion euros (2023: 322.3 billion euros; previous forecast: increase of up to 5 percent).

The decision has been taken in response to the challenging market situation and developments that fell short of original expectations, particularly for Brand Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, and Tech in Q3.