This is not just about cutting costs because of the emissions scandal but moving to a new strategy in a rapidly changing car market. Comment from Professor Christian Stadler.

There are three reasons behind this shedding of jobs, which will have been agreed with the unions beforehand and will come mostly from early retirements as 23,000 are in Germany. First Volkswagen is responding to the potential lawsuit tsunami heading its way from all over the world due to the emissions scandal, with $18 billion of fines looming in the US alone. Secondly, Volkswagen has fallen behind in terms of profit margin per vehicle against its rivals, even lagging behind Peugeot.

In the first half of 2016 Peugeot had a profit margin of 6.8 percent while Volkswagen’s is 2 percent. VW hopes to increase it to 4 percent, so it needs to raise its productivity levels and become more efficient. Thirdly electronic vehicles are the future and they need less people to build them in the production process. China – the biggest car market in the world – has announced it will bring in an e-vehicle quota starting in 2018, where 8 percent  of all vehicles sold in China have to be e-vehicles, and that will rise to 12 per cent in 2020. It means VW would have to sell 60,000 e-vehicles in China by 2018, and hybrids only represent half a point.

That is a huge undertaking. The total amount of e-vehicles in China is around 500,000, even BMW, one of the pioneers of electronic cars has sold just 1,204 e-vehicles in China in 2016 up to September. Norway’s sovereign wealth fund holds a sizeable stake in VW and has been putting pressure on them to become more environmentally friendly.