Volkswagen’s EV Turnaround Plan: What Went Wrong and What the 2025 Restructuring Actually Involves

# Volkswagen’s EV Turnaround Plan: What Went Wrong and What the 2025 Restructuring Actually Involves

Volkswagen entered 2023 as the European automaker most publicly committed to the EV transition. It had invested heavily in the MEB platform, launched the ID.4 globally, announced factory conversions across Germany, and set explicit targets for ending combustion engine production. By late 2023, the narrative had inverted. ID.4 sales were disappointing in Europe and significantly worse in the United States. The Wolfsburg factory was running at 70% capacity. A series of profit warnings followed.

The problem wasn't fundamentally the technology. The MEB platform is competitive. The ID.3 and ID.4 are decent cars. The problem was cost structure, pricing, and software — three failures converging simultaneously.

## The Numbers

| Metric | 2023 | 2024 Change |
|--------|------|-------------|
| ID Series global sales | ~573,000 | +8% (to ~620,000) |
| VW Group operating margin | 6.2% | Down to ~3.5% |
| CARIAD headcount | ~5,000 | -30% (restructuring) |
| Wolfsburg capacity utilization | ~70% | Still below 80% |

## The cost structure problem

VW's German manufacturing cost base — decades of union agreements, supplier relationships, and factory layouts optimized for complex internal combustion assembly — doesn't map easily onto EV economics. EV assembly involves fewer parts and less labor per vehicle, but VW's fixed cost structure hadn't been adjusted to reflect this. The company was building EVs at a cost basis designed for premium ICE production. Margins were structurally negative on most ID Series models.

## The software failure

VW's in-house software subsidiary, CARIAD, was meant to give the group Tesla-like OTA update capability and reduce dependence on Bosch and Continental. Instead, CARIAD delivered significant delays to multiple vehicle programs, most visibly the Audi Q6 e-tron and Porsche Macan EV. Building a unified software stack across VW, Audi, Porsche, SEAT, and ŠKODA proved dramatically harder than the project's original scope assumed.

## What the 2025 restructuring actually involves

VW announced in late 2024 that it was considering closing German plants for the first time in the company's 87-year history — a statement that triggered immediate union confrontation. The eventual agreement avoided immediate plant closures but included workforce reduction targets (around 35,000 jobs globally), wage freezes, and changes to shift patterns.

CARIAD is being restructured toward partnerships rather than full internal development. VW took a stake in Rivian partly to access software engineering expertise. The ambition of a fully proprietary software stack has been quietly downgraded.

On the product side, VW is accelerating cheaper models, including an ID.2 targeted at under €25,000, and has brought in external help on pricing strategy. The gap between VW's entry-level EV prices and competitors — including Chinese brands navigating EU tariffs — was simply too large to sustain.

## The Verdict

VW's scale makes its survival nearly certain. Its path to EV profitability is slower and more expensive than the 2020 strategy assumed. The restructuring is real, painful, and probably the minimum necessary. The strategic direction hasn't changed — the execution has gotten significantly harder.

Volkswagen’s EV Turnaround Plan: What Went Wrong and What the 2025 Restructuring Actually Involves

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