(Yicai) Aug. 3 -- As part of plans to reverse its waning fortunes in China amid fierce competition from local rivals, Volkswagen Group has said the world's largest automaker by revenue intends to slash production in the country, its largest market.

VW recently set out its future development strategy during its first-half earnings briefing, outlining the Wolfsburg-based company’s most extensive restructuring since it was founded nearly 90 years ago. It has closed factories in Nanjing as well as the Ningbo No. 1 plant, and cut capacity at the No. 1 factories in Anting and Changchun.

VW said its goal is to achieve an operating return on sales of 8 percent to 10 percent by 2030. The firm will lower its global production capacity target from 12 million to 9 million vehicles a year amid a slide in demand, by closing, renovating, and disposing of redundant factories.

As part of its 2030 technology roadmap, VW will no longer implement a globally unified strategy in software, but adopt different approaches in the East and West, while also pursuing regionally differentiated development. In the eastern hemisphere, with its partners Xpeng Motors and CARIAD China, it will develop an electronic-electrical architecture tailored specifically for the Chinese market.

The firm will also implement localized intelligent driving research and development through Carizon, a joint venture between VW China, CARIAD, and Horizon Robotics.

VW has long been known to have a hugely excessive number of employees, with a headcount of around 630,000 globally, and has announced major redundancy plans that have proved controversial in Germany. 

Its 2030 vision also includes cuts in production capacity, with a reduction of up to 50 percent of vehicle models, along with streamlining of organizational structure and investment equity layout.

The goal is to make VW the most attractive carmaker in the world by 2030, it pointed out. The plan covers all necessary areas for optimization, and rapid, decisive implementation will be the key to success, according to Chief Financial Officer Arno Antlitz.

VW is still the world’s largest carmaker by operating revenue and long headed the leaderboard in China, having once had a 40 percent market share. But having failed to keep up with the pace of electrification, the business is now struggling to defend its position against Chinese rivals such as BYD and Geely Holding Group.

VW reported operating revenue of EUR158.1 billion (USD181.06 billion) for the first half of this year, essentially flat from a year earlier, and EUR5.93 billion in operating profit, down 12 percent, resulting in an operating return on sales of 3.8 percent, its earnings report showed.

Business performance varied by region, but the sustained slowdown in the Chinese market was the key factor dragging down the company’s overall performance, it said.

In the six months ended June 30, VW delivered 4.126 million new cars, down 6.3 percent from a year earlier, having sold 973,000 in China, 26 percent fewer. But if the Chinese market is excluded, the delivery volume in other regions grew 2 percent.

The contribution made by its Chinese JVs to the parent company’s operating profit was only EUR184 million (USD210.72 million) in the first half, down more than 60 percent from EUR506 million in the same period last year. The full-year figure is expected to be EUR200 million to EUR600 million.

Editor: Tom Litting