Volkswagen Urged to Build China-Developed Cars in German Plants
Volkswagen is facing mounting pressure from its second-largest shareholder — the German state of Lower Saxony — to manufacture China-developed car models at its German plants as a strategy to protect domestic jobs and improve factory utilization. The proposal, advanced by Lower Saxony Premier Olaf Lies, comes amid reports that Europe’s largest automaker is considering cutting up to 100,000 jobs and closing four German factories in what would be the most radical restructuring in its 89-year history.
The Proposal
Lies, who sits on Volkswagen’s supervisory board, first proposed examining the possibility of building China-developed cars at German VW plants in an interview with the Neue Osnabrücker Zeitung on April 19, 2026. He renewed the proposal in late June following reports of massive potential job cuts, telling DPA that manufacturing Chinese-developed vehicles in Germany could stabilize capacity utilization and protect employment.
“If we produced vehicles here that we currently make in China, we could stabilize capacity utilization of our plants,” Lies said, as reported by NDR. “This would also create the opportunity for new development and innovation at our locations. To me, it’s about stabilizing employment and capacity utilization at our plants, instead of watching others build new plants outside of Germany.”
Financial Crisis and Restructuring
The proposal comes as Volkswagen navigates one of the most challenging periods in its history. The company’s operating profit fell 53.5% in 2025 to €8.87 billion and dropped a further 14.3% in the first quarter of 2026 to €2.46 billion, according to Caixin Global. First-quarter revenue fell 2.5% to €75.7 billion, with the operating margin slipping to 3.3%.
On June 26, Manager Magazin reported that CEO Oliver Blume is planning to cut up to 100,000 jobs — approximately 15% of the global workforce of roughly 657,400 — and close four German plants in Hanover, Zwickau, Emden, and Audi’s Neckarsulm site. The plan is expected to be presented to the supervisory board on July 9, 2026. The restructuring reportedly includes reducing planned investment by about 15% to just over €130 billion ($148.2 billion) over the next five years.
A Volkswagen spokesperson declined to comment on “internal, confidential documents,” telling CNBC that “the entire Group — including its brands and subsidiaries — must undergo profound change.”
Union Opposition
The reported plans would break a 2024 agreement between Volkswagen and unions to avoid factory closures in Germany and rule out compulsory redundancies until the end of 2030. Volkswagen’s General Works Council and German industrial union IG Metall have pledged to fight the cuts.
“If such plans were to be pushed forward, we would prevent them with all our might,” the Works Council and IG Metall said in a joint statement, according to CNBC.
A Reversal in Industrial Flows
Lies’ proposal reflects a significant shift in global automotive dynamics. Volkswagen has operated in China for over 40 years and maintains more than 30 production facilities there. The company has increasingly turned to Chinese partners to close the technology gap in electric vehicles and software, including a technology cooperation agreement with XPeng signed in February 2024 to develop VW-brand electric models featuring XPeng’s autonomous driving software.
Jian Junbo, Director of the Center for China-Europe Relations at Fudan University, told the Global Times that the proposal “reflects a reversal in industrial flows: Whereas in the past, Germany and Europe as a whole invested in and built factories in China, a new trend may be emerging in which Germany is attracting joint brands from China to manufacture in Germany.”
Lies visited China in April 2026 — his first foreign trip as premier — to learn about Volkswagen’s China operations and innovative mobility concepts. He wrote on LinkedIn that “China is and remains an indispensable partner for Lower Saxony, particularly in future technologies such as battery production, autonomous driving, and innovative mobility solutions.”
Strategic Questions Ahead
The proposal raises significant questions about Volkswagen’s future direction. Can Chinese-designed cars be profitably built at German cost levels? How would German consumers respond to “Chinese-designed” Volkswagens? And how would deepening ties with Chinese partners intersect with escalating EU-China trade tensions, including the EU’s anti-subsidy tariffs on Chinese EVs?
With the supervisory board meeting scheduled for July 9, the coming days will be critical in determining whether Volkswagen pursues deep restructuring, deeper collaboration with Chinese partners, or some combination of both. Lies’ proposal represents an attempt to find a middle path — preserving German production volumes while leveraging Chinese technological advances.
As Zhang Xiang, Secretary-General of the International Intelligent Vehicle Engineering Association, noted: “Core elements like the electric motor, battery, and electronic control systems are entirely new. This is precisely where German automakers need to collaborate with Chinese automakers — to leverage each other’s strengths and offset weaknesses.”
The outcome of this debate will have implications not just for Volkswagen’s 657,400 employees, but for the future of the German automotive industry and the global balance of power in electric vehicle manufacturing.