Key Takeaways
- Volkswagen’s restructuring plan calls for plant closures, sweeping job cuts, and a reduction in the number of models offered.
- Shares rose 6% on the plan, but Volkswagen stock is still down 22% this year amid an industrywide malaise.
- With shares trading around EUR 82, most analysts consider the stock undervalued.
Volkswagen’s VOW3 breakthrough restructuring deal marks a milestone for the ailing German auto stock, according to analysts, who say the firm’s willingness to take difficult decisions could provide a critical boost to Europe’s largest carmaker.
Volkswagen’s supervisory board last week backed a sweeping overhaul under CEO Oliver Blume, calling for 50,000 additional job cuts, fewer models and further potential plant closures. The plans, first announced in June, had been locked in acrimonious talks between management, unions and the state of Lower Saxony—Volkswagen’s second-largest shareholder and home to its headquarters—before the agreement was struck Thursday.
Investors welcomed the hard-won agreement, with shares of Frankfurt-listed Volkswagen rising over 6% following the announcement last Thursday. However, with the stock down 22% so far this year, prompting its recent relegation from the widely-followed Euro Stoxx 50 and a bout of forced selling, investors are waiting to see the rubber hit the road on the firm’s ‘Future Plan 2030’. “A lot of shareholders want to see them first deliver before they buy into that,” says Daniel Schwarz, equity analyst at Metzler Capital Markets.
How Volkswagen’s Overhaul Strategy Looks In Practice
Volkswagen Group, whose brands include Audi, Skoda, Bentley, and Lamborghini, has been struggling over recent years alongside other European carmakers in the face of increased Chinese competition, US tariffs, and weaker demand on its home turf. The company’s operating profit declined 12% year-on-year in the first half of 2026, having fallen more than 50% in the prior year.
Volkswagen shares have declined sharply in tandem, with the stock now trading at less than a third of its 2021 level. In the postpandemic era, it suffered the steepest decline among European peers BMW BMW, Mercedes-Benz MBG and Renault RNO.
Under Blume’s latest overhaul plans, the firm will halve its model offering and cut the complexity of its products by 75% by 2035 in a bid to boost profits. The new tranche of job cuts adds to previously announced plans to slash 50,000 jobs in Germany by the end of 2030, taking the total headcount reduction under Blume to over 100,000, or around one-sixth of the global workforce.
Morningstar equity analyst Rella Suskin calls the plan a “big step” forward in the 89-year-old firm’s “history of inflexibility,” and a potential signal of increased amenability to future portfolio decisions.
While Suskin says the firm’s headcount reduction exceeded market expectations, she dubs its aim to reach a 9% operating margin by 2030 “unrealistic,” describing the announced changes as “necessary to maintain margins at current low-single-digit levels.”
Volkswagen posted a 3.8% operating margin in the first half of 2026. Even after reducing headcount, the carmaker’s productivity would fall short of mass-market rival Toyota 7203, which generates a high single-digit margin, according to Morningstar. Meanwhile, the firm’s forecasts for flat global volumes and flat pricing in Europe underestimate the extent of volume declines and pricing pressure in Europe, Suskin notes.
Daniel Schwarz, equity analyst at Metzler Capital Markets, says the overhaul marks a “proactive step” in boosting Volkswagen’s competitiveness. “The products are competitive; the cost structure not so much,” he says. He adds that if managed correctly, Volkswagen could leverage its relative strength in China versus European peers to defend market share in its home continent.
“There will be more competition; the question is who will suffer most from that,” he continues. “The opportunity for Volkswagen is they are still a very big player in China. When Chinese OEMs [original equipment manufacturers] are now coming to Europe, the OEMs who were pushed out of China in the past, there’s a bigger risk that they lose more market share and earlier to Chinese models.”
Elsewhere, the carmaker is weighing the closure of four manufacturing plants—Emden, Zwickau, Neckarsulm and Hannover—which all face a staggered phase-out from 2031 onward. A deal struck Monday with an Israeli investment group to switch production at Volkswagen’s embattled Osnabrück factory to components for Israeli air defense could provide a “blueprint” for other sites, according to Stuart Pearson, head of global automotive & mobility research at Oxcap Analytics.
“It’s symbolic, Osnabrück, but it’s not going to move the needle. However, if it signifies that Lower Saxony are open to those kinds of solutions, it could be meaningful,” Pearson says, citing increasing appetite among auto firms and German authorities to repurpose underutilized car plants and workforces across other burgeoning industries.
What Other Changes Could Be Coming?
Another contested element of the agreement, which has not yet been confirmed, is the spinoff of the VW brand and its components business into separate entities. According to analysts, such a move could mark an even more notable turning point for the firm.
“We believe rationalizing the group’s portfolio of businesses by one-third presents interesting opportunities to unlock value for shareholders,” says Suskin. “Unbundling brands that do not align with the company’s core mass-market car offering could unlock substantial value.”
Until recently, Volkswagen has been resistant to an unbundling of its various businesses, with its ownership and governance structure favoring a unified approach. However, under pressure to restructure and boost shareholder value, those prospects could gain traction.
“There’s always the sum of the parts argument with Volkswagen. It’s always trading at a discount to the sum of the parts,” Schwarz says. “If they do not succeed on the cost side, I think there’s a bigger chance that they will be broken up.”
Is Volkswagen’s Stock Set for a Rebound?
Volkswagen shares are currently trading near a two-year low of EUR 82, with a price/earnings ratio of 7.95. That compares with ratios for Renault and Mercedes of 9.03 and 9.10, respectively.
Morningstar kept its fair value estimate for the stock at EUR 116 following last week’s deal, slightly above the analyst consensus of EUR 110 compiled by FactSet. “Our fair value estimate still suggests significant upside based on practically no revenue growth, mid-cycle margins of 3% and capital expenditure exceeding targets,” says Suskin.
Still, some analysts suggest the stock could have further room to climb if last week’s deal is an indication of the automaker’s commitment to correct course.
“An important component of this whole restructuring plan is not just higher earnings but also lower capex. When you have higher earnings and lower capex, it’s usually positive for the free cash flow. When the cash flow conversion is going up, usually the valuation multiples are also going up,” says Metzler’s Schwarz, retaining his price target of EUR 130. “It’s a restructuring plan that has zero topline components; it’s all based on cost-cutting, so it’s really in the hand of Volkswagen.”
