How Volkswagens Troubles Were Made in China

Volkswagen has problems around the world, spurring it to announce on Thursday that it would slash the number of models it offers by as much as half, but many of its troubles can be traced to China.The German auto giant, the world’s second-largest carmaker after Toyota, led the pack in China, the world’s largest car market, for four decades.For many years, the company’s joint ventures and factories in China provided half or more of the company’s worldwide profits, which helped Volkswagen afford high salaries and generous benefits for its vast work force back in Germany.But Volkswagen’s sales in China last year were down by a third compared with 2019, as the company lagged Chinese competitors in the switch to electric cars.

And the company’s performance keeps getting worse: Sales in China from April through June were down by another third from just last year, a weak performance even by the standards of China’s slowing economy and shrinking car market.Volkswagen now faces daunting competition from Chinese rivals in markets outside China, too.Chinese cars are pouring into Latin America and Africa, where Volkswagen has long been among the market leaders.

And in the European Union, VW’s home turf, Chinese automakers passed Japanese automakers in terms of market share in May.The rapid expansion by low-priced Chinese entrants in Europe is putting heavy pressure on Volkswagen and other European manufacturers to cut prices, shrinking their profit margins.Volkswagen did not provide details on Thursday about how it might slim down its operations in line with a more limited model lineup.

The company said it would aim to produce nine million vehicles a year, compared with a goal of 12 million before the Covid-19 pandemic and 10 million more recently.German press reports had suggested that Volkswagen was preparing to lay off as many as 100,000 workers by the end of the decade and close four factories in Europe.Volkswagen’s China-related troubles can be traced...