Volkswagen's largest shareholder wants to build Chinese-market cars in Germany

Volkswagen’s largest shareholder has a blunt proposal for keeping German factories open: build cars designed for the Chinese market on home soil.

Lower Saxony governor Olaf Lies, whose state holds 20 percent of Volkswagen’s voting rights, told Reuters last week that moving production of Chinese-market models to Germany would stabilize factory utilization and protect jobs. “Instead of watching other companies build new factories outside Germany, I care more about stabilizing employment and capacity utilization rates at German plants,” Lies said.

The suggestion arrives as Volkswagen weighs closing four German factories and cutting up to 100,000 jobs — the most drastic cost-cutting plan in the company’s history. The automaker has said its current business model no longer works, squeezed by three forces at once: rising competition from Chinese automakers, higher US import tariffs, and weakening demand across Europe.

Volkswagen’s headquarters sits in Lower Saxony, which hosts five of the company’s six western Germany assembly plants. The state’s 20 percent voting stake gives it effective veto power over major corporate decisions, so any restructuring plan the board puts forward will need Lies’s support.

He first raised the idea after returning from a trip to China in April. The renewed call last week signals that the state government is searching for unconventional answers as the cost crisis deepens.

In a related development, Porsche is reportedly considering moving Cayenne production from Slovakia to its Leipzig plant in Germany to improve local factory utilization, according to Frankfurter Allgemeine Zeitung. Volkswagen Group brands share platforms, and the Cayenne is built alongside the Touareg and Audi Q7 and Q8 in Bratislava.

The open question is whether the numbers work. German labor costs are among the highest in the world, and vehicles designed for the Chinese market are engineered to different cost targets. But for Lower Saxony, the alternative — empty factories and tens of thousands of layoffs — looks worse.