Strategy & Competition · Volkswagen
Volkswagen Is Fighting the Wrong Crisis
Plants closing, jobs cut, bonuses slashed. The group is cutting costs. But cost is not the problem. The problem is software and China, and you cannot cut your way out of either.
Every VW headline carries the same number: how many jobs are going. Add plant closures, bonus cuts, a billion-euro savings program. The message: Volkswagen is too expensive, so it has to get cheaper. A clean story with one flaw: it describes the wrong problem.
By revenue, VW is the undisputed number one. That is exactly why the cost logic seems to fit: if so much comes in at the top and little is left at the bottom, the middle must be bloated. But the margin is not thin despite VW being large, it is thin because two cost blocks are out of control that appear on no cost-cutting list: its own software and collapsed sales in China.
The contrast with BYD is structural, not a subsidy story: whoever builds battery, semiconductor, and software in-house captures margin at every stage. That lead does not vanish with the next economic cycle, and no savings program closes it. Cost cutting buys time. The only question is what Wolfsburg spends that time on.
Volkswagen can close every plant in the world and still won't be competitive as long as the software keeps failing and China keeps eroding. Cutting costs is not a plan, it is the absence of one.
Method
What you read here is my analysis, clearly marked as an opinion. The figures I refer to are linked with their source and date. Terms I explain in the glossary. No investment advice, figures without guarantee.
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