Volkswagen Is Already Cutting Costs

In an interview with German newspaper Bild last month, Volkswagen CEO Oliver Blume was painfully honest about the automaker’s delicate situation. He blamed “decades-long structural problems” for the lack of competitiveness, citing high labor costs as one of the main culprits. Massive layoffs, pay cuts, and even plant closures are looming to optimize the business, but VW is also looking to cut costs in other areas.

Head of technical development, Kai Grünitz, spoke with Automotive News Europe’s sister magazine Automobilwoche about how VW intends to save money. It’s reducing the time it takes to develop a new model to 30-36 months. The goal for new vehicles that use an existing platform is to finalize the product even sooner. If VW were to stick to its previous modus operandi by taking 4-5 years to put a new car on the market, it would already be outdated by the time it goes on sale, according to Grünitz.

Speeding up development is facilitated by doing fewer real-world tests. VW built 40% fewer prototypes in 2024. By now, you’re probably (and rightfully) concerned that quality has consequently taken a hit, but Grünitz says that’s not actually the case. The Wolfsburg-based automaker is doing more bench and virtual testing to compensate for a reduction in the number of physical test vehicles.

“We can now run the entire development chain with a digital prototype, shortening the product development process and reducing costs without sacrificing testing depth.”

Elsewhere, VW wants to avoid cramming in more functions the end customer might not even notice, let alone use. Grünitz explains the priority has been switched to useful features that offer real value instead of being there just for the sake of it. The intent is to listen to what the customers really want rather than throwing things at the wall and seeing what sticks.

VW has already axed plans to build a €2 billion factory that would enable a car to be built in only 10 hours. Even so, the new objective is to “radically cut manufacturing times” at existing plants by installing new and more advanced tools. Working closer with suppliers will also bolster efficiency.

Will these measures save thousands of jobs and avoid plant closures? It’s too early to say, but VW workers have reasons to be concerned. Employees at all factories across Germany are going on strike this week. Management has pointed out that it needs to close three factories and slash wages by 10% to boost its competitiveness amid slower sales, partially caused by China’s EV offensive.