Key Volkswagen Shareholder Pitches Producing China-Designed Car Models in Germany
Volkswagen could secure jobs in Germany if it produced auto models there that it currently develops in China, the premier of the German state of Lower Saxony, a major shareholder in the carmaker, was quoted as saying on Sunday, June 28. Lower Saxony premier Olaf Lies made his remarks to German news agency DPA following reports on Friday that the embattled carmaking giant is considering shutting four German factories and ramping up job cuts to as many as 100,000. Regional Media NewsRegional Media News
“If we produced vehicles here that we currently make in China, we could stabilize capacity utilization of our plants,” Lies said in an interview published at the weekend. “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.” Regional Media News
Lies’s Standing Within Volkswagen
Lies sits on Volkswagen’s Supervisory Board in his capacity as premier of Lower Saxony, a state government that, alongside the Porsche-Piëch family and Qatar’s sovereign wealth fund, holds significant influence over the carmaker’s strategic direction. Lower Saxony serves as Volkswagen’s second-largest shareholder, a position that gives the state government substantial leverage over decisions affecting domestic jobs and factory locations. Washington TimesCrypto Briefing
This is not the first time Lies has floated the idea. He had already raised the prospect of building Chinese-designed cars in German Volkswagen plants as far back as April 2026, around the time of the Auto China trade show in Beijing. Volkswagen chief executive Oliver Blume has also expressed support for the idea, according to reporting on the company’s deliberations. Washington TimesCrypto Briefing
The Scale of Volkswagen’s Crisis
The proposal comes against the backdrop of a deepening financial and strategic crisis at Europe’s largest carmaker. Volkswagen’s net profit for the first quarter fell 28.4 percent year over year to $1.80 billion. Operating profit declined 14.3 percent to $2.83 billion, while revenue slipped 2.5 percent to $86.96 billion. On a full-year basis, operating profit dropped 53 percent from the previous year to $10.24 billion, pushing the operating margin down to 2.8 percent — marking the company’s weakest performance since the 2015-2016 Dieselgate emissions-cheating scandal. Crypto Briefing
The deterioration in earnings has translated into credit-rating pressure. Moody’s downgraded Volkswagen’s credit rating last year from A3 to Baa1, marking the first downgrade since the Dieselgate scandal a decade ago. Fitch currently rates Volkswagen at A-, while Standard & Poor’s assigns a BBB+ rating. Moody’s cited four factors behind its outlook: escalating trade tensions, structural challenges associated with the EV transition, intense competition in China, and software-related difficulties. Crypto Briefing
The stock closed Friday at €74.40, down 3.68 percent on the session and roughly 30 percent below its level at the start of the year, just 28 cents above the 52-week low of €74.12 touched on June 26. The Korea Herald
A Boardroom Battle Over Strategy
A battle over the soul of Volkswagen is playing out behind closed doors in Wolfsburg, with two radically different visions having emerged: a sweeping plan to slash up to 100,000 jobs worldwide, and a political counterproposal to fill German factories with cars developed in China. The clash is due to come to a head on July 9, when the supervisory board is scheduled to debate management’s cost-cutting blueprint. Media reports have pegged the potential headcount reduction at 100,000 globally, though the company has neither confirmed nor denied that figure. The Korea HeraldThe Korea Herald
The idea taps directly into Volkswagen’s existing China strategy. At the Auto China 2026 event in April, the group unveiled an ambitious product offensive featuring locally developed electric vehicles, digital cockpit services, driver assistance systems, and a dedicated China Electronic Architecture. The company plans to launch around 30 electrified models by 2027 and 50 by 2030. Lies’s proposal would repurpose some of those models for European buyers. The Korea Herald
Open Questions on the Economics
Whether the economics of Lies’s proposal work remains an open question. German factories operate with a fundamentally different cost structure than Chinese plants, and no concrete details on specific models, production volumes, or margin implications have been disclosed. For investors, the key uncertainty is which restructuring measures — from plant closures to model transfers — are politically and co-determination compliant, a reference to Germany’s system of mandatory worker representation on corporate boards, which gives labour representatives a formal voice in decisions of this magnitude at Volkswagen. The Korea HeraldThe Korea Herald
Regional and Global Impact
The dispute over where and how Volkswagen produces its next generation of electric vehicles reflects a broader structural challenge facing Germany’s automotive sector as a whole. Industry analyst Ferdinand Dudenhöffer has argued that China’s dominance in the EV sector will increasingly be “exported” over the coming years, drawing a parallel to how Japan exported its automotive dominance roughly 50 years ago, and Germany did so around 70 years ago. EU tariffs on Chinese electric vehicles, in place since 2024, have so far not stopped the advance of Chinese brands into the European market, even as some Chinese manufacturers simultaneously expand their own production footprint within Europe. Washington TimesWashington Times
For Germany, the proposal floated by Lies represents an unusual inversion of the trade and industrial competition dynamic typically associated with China’s rise in the global automotive sector: rather than treating Chinese-designed vehicles purely as a competitive threat to domestic manufacturing, the suggestion treats them as a potential lifeline for preserving German factory jobs, repurposing capacity that would otherwise face closure under Volkswagen management’s restructuring plans.
Background
Volkswagen has built a major manufacturing and design presence in China over the past four decades, making the country central both to its sales and, increasingly, to its product development for electric vehicles. Lower Saxony has held a significant ownership stake in Volkswagen since the company’s privatisation in the 1960s, giving the state government a permanent seat at the table for major strategic decisions, including plant locations and workforce levels. Germany’s co-determination system requires large companies, including Volkswagen, to include worker and union representatives on their supervisory boards, giving organised labour substantial influence over decisions involving plant closures or mass layoffs. Volkswagen has faced sustained margin pressure in recent years from the costly transition to electric vehicles, intensifying competition from Chinese manufacturers both in China and increasingly in Europe, and broader global trade tensions affecting the automotive sector.
What Happens Next
Volkswagen’s supervisory board is scheduled to debate management’s cost-cutting blueprint on July 9, followed by a first-half pre-close conference call on July 13 and the full half-year financial report on July 24. Each of those milestones is expected to provide further clarity on whether the company moves forward with the scale of job cuts reported on Friday, adopts elements of Lies’s proposal to shift Chinese-designed production to Germany, or pursues some combination of both approaches. The outcome will be closely watched by Volkswagen’s workforce, German political stakeholders, and investors assessing the company’s path through what analysts have described as its most significant transformation crisis since the Dieselgate scandal a decade ago. The Korea Herald
