The Volkswagen Group has rolled out a voluntary early-retirement scheme for its entire blue-collar workforce at its two manufacturing facilities in India, affecting approximately 2,300 employees.
Despite operating in India for over two decades and selling a suite of luxury brands, including Volkswagen, Skoda, Audi, Porsche, Lamborghini, and Bentley, the Group holds only about a 2% market share. Sources indicate that both of the company’s factories in the western state of Maharashtra are currently running below their installed production capacities.
The early retirement scheme has been introduced to “rationalise the manpower and align it with current needs,” according to one source, while ensuring the company can continue to pay competitive wages and keep the plants operational.
Details of the Offer
- Employees who opt in will receive 75 days of pay for each year served or each year remaining until retirement, whichever is lower.
- An additional payout is being offered to those who sign up within the first five to ten days of the announcement.
Skoda Auto Volkswagen, which has been leading the Group’s India strategy since 2018, confirmed that the restructuring program is designed to strengthen its business and “reaffirm our long-term commitment to India.”
Struggles in the Indian Market
Low Market Share
The Group’s continued struggle to meaningfully grow its market share in the competitive Indian landscape is a primary factor. The CEO of Skoda, Klaus Zellmer, has previously stressed the critical need for growth in India following the brand’s reduced presence in China and exit from Russia.
Tax Dispute
Volkswagen is also currently contesting India’s largest-ever import tax demand, a massive $1.4 billion claim related to alleged levy evasion. The company has denied the allegations.
The restructuring efforts are taking place as Skoda Auto Volkswagen simultaneously seeks a local partner to finalize the next phase of its investment and expansion plans in the country. The two Maharashtra plants currently manufacture models such as the Skoda Kushaq SUV, Volkswagen Virtus sedan, and Audi Q3 and Q5 for both domestic and export markets, including Mexico and South Africa.
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