Volkswagen Group is preparing one of the most significant rationalisations of its product range in decades, with CEO Oliver Blume confirming plans to reduce the company’s model line-up by up to 50% and cut the complexity of vehicle offerings by as much as 75%.
The move is central to Volkswagen’s latest transformation plan and reflects a fundamental problem facing one of the world’s largest car manufacturers: having an enormous range of brands, models, powertrains, platforms and derivatives is no longer necessarily an advantage when development costs are rising, production capacity is underused and competition is intensifying.
Blume has been clear about the objective, telling journalists that Volkswagen is preparing “a major reduction of up to 50% of our product” to reduce manufacturing and development costs while strengthening the positioning of individual models.
“We want to focus our expenditures on clear-focused products – to improve innovations, to improve technologies, to improve equipment, and to improve the quality of the single products – then to achieve higher volumes with more focused products.
“To achieve a higher profit margin per product – that’s the intention.”
The logic is straightforward. Rather than spreading investment across an increasingly complicated portfolio, Volkswagen wants fewer vehicles that sell in greater volumes, with more development money available for each one.
Why Volkswagen needs to simplify
The scale of the challenge became apparent in the company’s 2025 results. Volkswagen Group generated €321.9 billion in revenue, broadly unchanged from 2024, but operating profit fell by 53% to €8.9bn, leaving an operating margin of just 2.8%. The company sold around nine million vehicles globally.
The situation remains challenging in 2026. In the first half, Volkswagen Group revenue was almost unchanged at €158.1bn, but operating profit fell 11.6% to €5.9bn and vehicle sales declined 8.4% to around four million. The operating margin was just 3.8%.
China is a particularly important part of the problem. Volkswagen has lost ground to increasingly sophisticated Chinese manufacturers, while Chinese brands are now expanding aggressively into Europe. Volkswagen says the Chinese total market has fallen by 20%, while competitive pressure from Chinese manufacturers has increased as they expand exports.
At the same time, the industry is undergoing an expensive technological transition. Volkswagen must fund electric vehicles, batteries, software, autonomous-driving technology and new electronic architectures while continuing to support combustion-engine vehicles.
The result is an uncomfortable financial equation: maintaining a huge number of products and variants consumes engineering, tooling, purchasing, logistics and production resources that could arguably deliver a greater return if concentrated on fewer vehicles.
Arno Antlitz, Volkswagen Group CFO and COO, described the current 3.8% operating margin as “too low” and said the company needs to “significantly reduce complexity” across its product portfolio, platforms, equity portfolio and organisational structures.
What does a 50% reduction actually mean?
Importantly, Volkswagen is not simply proposing to stop selling half its cars.
The headline figure refers to the model line-up being gradually concentrated on the most attractive market segments. Alongside this, the company intends to reduce offering complexity by up to 75%, including the number of equipment options available to customers.
That distinction is significant.
A vehicle manufacturer can create enormous complexity from apparently minor differences between cars. Different engines, batteries, transmissions, trim levels, equipment combinations, body styles and regional specifications all create additional demands on purchasing, production planning, software development, logistics and aftersales.
Reducing those permutations allows Volkswagen to manufacture larger numbers of more standardised vehicles, potentially improving economies of scale and factory utilisation.
It also means engineers can spend more time developing features that customers actually value rather than maintaining multiple versions of relatively low-volume products.
A simpler Volkswagen could be a better Volkswagen
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There is a strong strategic argument behind the approach.
Volkswagen Group has built its strength partly through its extraordinary brand portfolio, ranging from Volkswagen and Škoda to Audi, Porsche, Bentley, Lamborghini, SEAT and CUPRA, alongside its commercial vehicle operations. But there is inevitably some overlap between products and market segments.
The company now wants each brand and model to have a clearer role, reducing internal competition and concentrating investment where it can generate the greatest return.
Volkswagen says fewer platforms and electronic architectures will also reduce development costs and accelerate the introduction of new technology. Its future plan calls for key technology areas to be harmonised between the western and eastern hemispheres, eliminating parallel structures and increasing the ability to share technology across the Group.
This could become particularly important in the electric vehicle market, where Volkswagen needs to compete against manufacturers that have developed products and software much more rapidly than many traditional European manufacturers.
The company has already demonstrated that focused products can work. Its new Electric Urban Car Family, led by the ID. Polo, generated more than 70,000 orders within weeks of launch, while Volkswagen reported that its European order bank for all-electric vehicles increased by more than 50% during the second quarter of 2026.
Production will have to change too
Product rationalisation cannot be separated from Volkswagen’s manufacturing footprint.
The Group is targeting production capacity of around nine million vehicles a year, compared with the roughly 12 million-unit capacity that existed after the pandemic.
That is a major acknowledgement that the traditional automotive business model – build more factories, offer more derivatives and chase volume – is becoming increasingly difficult to sustain.
Volkswagen has already agreed substantial restructuring measures in Germany, while further reductions in employment and production capacity remain politically and industrially sensitive. Reuters reports that Blume is also examining ways of using under-utilised European plants, including the possibility of producing China-specific vehicles in Europe or sharing facilities with Chinese partners.
The strategy therefore goes beyond simply deleting unpopular cars from a brochure. It involves reshaping how Volkswagen develops, manufactures and sells vehicles.
The risks of doing less
There are, however, dangers.
A large portfolio gives Volkswagen the ability to address numerous customer niches and markets. Removing too many products could leave gaps for competitors to exploit, particularly as consumer preferences fragment between SUVs, hatchbacks, saloons, crossovers and electric vehicles.
There is also a danger that reducing choice could undermine premium positioning if customers feel they are being offered less rather than better.
Volkswagen therefore has to ensure that simplification is invisible to most customers. The objective should not be fewer desirable cars; it should be fewer marginal cars and far fewer unnecessary configurations.
That distinction will ultimately determine whether the strategy succeeds.
A necessary reset
Volkswagen’s decision to reduce its model range by up to half is best understood not as a retreat from the market but as an attempt to make its enormous industrial machine more efficient.
The company is facing lower margins, intense Chinese competition, expensive electrification, tariffs, software costs and under-utilised production capacity. Its 2025 results and first-half 2026 performance demonstrate that simply maintaining volume is no longer enough.
Blume’s ambition is therefore to turn Volkswagen’s scale from a source of complexity into a source of competitive advantage: fewer models, fewer variants, greater volumes per product and more investment in technology, quality and innovation.
If executed properly, customers may barely notice that Volkswagen is selling fewer vehicles. They should instead notice that the vehicles it does sell are better equipped, better engineered and more competitive.
For Volkswagen, that may be the difference between having one of the industry’s largest product portfolios and having one of its most profitable.
