New-Japan Business Consulting
Business strategy reports, business matching and M&A in Japan


VW announces new cost enhancement measures ACCELERATE FORWARD Road to 6.5

A new cost enhancement measure for the VW branded passenger car division, ACCELERATE FORWARD | Road to 6.5, has been announced, with the aim of realising cost benefits of EUR 10 billion in 2026 and increasing the operating margin to 6.5 per cent. The company plans to reduce costs by streamlining business processes, increasing efficiency in development/production, streamlining product lines and product options and strengthening synergies with the Group’s other brand divisions, without direct headcount reductions.

The VW brand, which faced difficulties with Dieselgate, announced restructuring in 2016, including a total of 30,000 headcount reductions (mainly through early retirement incentives and natural attrition). Since then, the company has continued its efforts to increase profitability by reducing overheads and improving productivity as it transitions to BEVs for software-defined vehicles. New measures to improve performance have been put in place as the company has most recently suffered from energy and raw material cost inflation.

VW executives have stated that the company will still be profitable with an entry-level BEV model priced at EUR 25 000 to be launched in 2025. On the other hand, it is not easy for a volume brand like VW to secure profit from a focus on BEV products, as raw material prices are rising and it is difficult to expect battery prices to fall as much as they initially did. It remains to be seen whether VW will be able to improve its traditionally high cost structure by promoting new cost-cutting measures, while increasing the ratio of BEV products to total sales, thereby increasing its profit margin.