Volkswagen CEO Warns European Mass-Market Model Under Strain

Volkswagen CEO Oliver Blume has warned that Europe’s mass-market carmakers face enormous pressure from Chinese rivals and worsening market conditions. Speaking on October 13 at an industry event alongside the Paris motor show, Blume outlined the most extensive overhaul in Volkswagen’s history, which includes plant closures and tens of thousands of job losses as possible outcomes. The plan has met strong resistance from trade unions.

Blume stressed that Volkswagen can no longer depend on profits generated outside Europe to sustain its regional operations. He said the pressure is not confined to Volkswagen, noting that Stellantis and Renault face the same challenge. "We cannot build our future on export profits alone. Our European businesses must be profitable, resilient and competitive," Blume stated. He described the traditional mass-market model with high volumes and thin margins as under particular strain in Europe and repeated Volkswagen’s call for policymakers to provide more flexible rules and support for domestic production.

Structural pressures on Europe’s mass-market model

The traditional high-volume, low-margin model is under strain due to EV investment, thin returns, and growing competition from Chinese manufacturers. Volkswagen, Stellantis and Renault together account for more than 60 per cent of European car production. Maintaining this formula is becoming harder as manufacturers invest heavily in electrification.

European demand for electric vehicles is growing, supported by higher fuel prices and a broader selection of cheaper models. The transition creates a difficult balancing act: offering affordable battery-powered vehicles while absorbing new technology costs, complying with emissions rules, and protecting thin returns. Chinese manufacturers are adding to the pressure. Chinese participation at the Paris exhibition reached record levels as companies sought European growth while demand weakened in China.

Policy response and industrial strategy

Blume has renewed Volkswagen’s request for more adaptable regulation and incentives that encourage production within Europe. European manufacturers broadly welcomed a recent EU-China agreement but sought additional measures, including support for the EV transition and relief from high energy costs. Stellantis chief executive Antonio Filosa said Europe needed more battery factories of its own.

Volkswagen, alongside Renault and Stellantis, has proposed a 'fleet booster' under the European Union’s planned Made in Europe rules. The joint paper was sent to the European Commission on June 12. The proposal and the Commission's draft differ on a key threshold.

The criteria are not limited to the origin of individual components; research and development, engineering, investment and production in the EU would all count. Proposed benefits include preferential access to national purchase incentives, public procurement, certain company-car tax advantages and CO2 supercredits. The measures form part of ongoing negotiations on the Industrial Accelerator Act and have not yet been adopted.

Renault chief executive François Provost warned that the company might have to cut European output by around 300,000 vehicles if policymakers do not show flexibility on 2030 carbon-emission targets. The Commission’s auto package would let manufacturers average their performance over 2030-2032 rather than meet a fixed annual target and would soften the 2035 goal to a 90 per cent cut on 2021 levels instead of zero.

Recent delivery declines and Chinese influence

Weaker Chinese demand drove delivery drops for major European carmakers in the third quarter. The declines highlight the reliance on the Chinese market and the shifting competitive landscape.

Volkswagen Group’s battery-electric deliveries in Europe rose 19.6 per cent. At the Paris show, manufacturers highlighted more affordable electric models, including an electric version of Citroën’s classic 2CV from Stellantis and Volkswagen’s electric Polo. Many of these models rely heavily on Chinese technology, components or partners.

Stellantis is developing the 2CV on a city-car platform designed with its Chinese partner Leapmotor. The model is due to be built at Pomigliano, near Naples, from 2028. Leapmotor is expected to supply most of the battery packs, electric-motor components, electronics and software architecture. Volkswagen is deepening its partnership with the Chinese battery maker Gotion. Current lithium iron phosphate cells for Volkswagen’s models have come from Gotion in China. New joint ventures agreed on September 28 include a plant in Valencia, eastern Spain, where Gotion is investing about €1.1 billion, intended to shift some production to Europe.

The assembly of the cars themselves is planned in Spain, but the cost advantage rests on Chinese-origin battery chemistry and partnerships. The European Parliament’s transport committee has postponed its vote on the auto package, with a plenary vote expected in November.