The Real Woes of Das Auto

In September 2026, German newspaper BILD published figures reportedly ‘taken from confidential Volkswagen documents’ prepared during discussions about major restructuring.

In practice, this probably translates to: VW very likely leaked the documents itself, to support their difficult decisions in the eyes of the public. To justify the factory closures and workforce reductions.

The figures were later republished by Deutsche Welle and other media, then by hundreds of other media outlets and specialists of the sector.

In the short version, the leaked data present German factories as significantly more expensive, with higher labour costs, shorter annual working hours, higher sickness absence and lower annual vehicle output per employee than their counterparts abroad.

The article compared three factories: Emden, Germany; Palmela, Portugal; and Tianjin, China.

Just like every other statistic, the data need to be taken with a grain of salt.

But even if they are somewhat distorted, the trend is clear: production in Germany is way more expensive as anywhere else. It shouldn’t be surprising, given that living standards and salaries are much higher in Germany than in Portugal or China.

Nevertheless, the most interesting part is the intended damage: collapsing the image of German productivity. These numbers supposedly prove that the German factory is not just the most expensive, but that it also has the lowest productivity, lowest working hours and the most days spent on leave. The result is overwhelming: in Portugal (still within the EU) the factory cost per vehicle is half of the German numbers, while the Chinese factory cost per vehicle is around the quarter of it.

Let’s not forget to look beyond the numbers, though – to see the whole dataset with the intent in mind.

Most experts immediately pointed at a serious flaw: the productivity comparison is misleading without accounting for working hours (that is, the vehicles per employee measure).

On an annual basis, the Tianjin factory apparently produces 77 percent more vehicles per employee than Emden. However, Tianjin’s employees also work approximately 61 percent more hours annually.

Dividing annual working hours by vehicles produced per employee gives more realistic numbers: the Emden factory spends 44.2 hours per vehicle, Palmela 35.6 and Tianjin 40.3 hours.

After this adjustment, Tianjin’s apparent productivity advantage over Emden falls from approximately 77 percent to 10 percent per employee-hour. In fact, it is Palmela, not Tianjin, that achieves the highest measured hourly output.

Professional commentator René Jaquett emphasized this distinction. He also argued that factory utilization can strongly influence the statistics: a factory operating below capacity may report fewer vehicles per employee without its workforce becoming less efficient.

Furthermore, the documents do not clearly establish whether employee numbers include only direct production workers or also maintenance, engineering, logistics and administration.

Consequently, the figures cannot reliably establish that Chinese workers are substantially more efficient than German workers.

This should be good news for the European car industry (and for European production lines, in general), but raises the question as to what motivated the VW group to present the misleading data.

A French analysis published by JeChange on October 13 reconstructed labour costs per vehicle using the reported hourly costs, annual working hours and vehicles per employee. At the estimated labour cost per vehicle, Tianjin clearly wins with €483. Palmela comes second with €1,316 and Emden is the last with a whopping €3,271.

Again, the estimates clearly point at the real cause behind the reported €3,772 factory-cost difference between Germany and China. Germany’s manufacturing disadvantage is primarily related to the price of labour rather than to the dramatically lower hourly productivity.

That is, if the calculations are right.

The next, and probably most significant factor is the cost of energy, as electricity is considerably more expensive in Germany.

But electricity prices alone cannot explain the factory-cost difference.

Likewise, international logistics and purchased components are more relevant to complete vehicle costs than to the narrow factory-level comparison.

Alas, these are the two factors where any European industrial actor suffers disadvantages compared to China and where Europe should find solutions for real.

In the last years every major German energy policy decision led the country towards a decline in competitiveness, starting with the emotionally driven abandonment of nuclear technology. In a country which has energy-intensive industries, but lacks its own fossil fuel sources, this decision has become painful on the long run.

Analysist have suggested several possible ways to solve Volkswagen’s difficulties.

Some argue that Germany’s labour costs represent a substantial competitive disadvantage. Increasing the working week from 35 to 40 hours without additional weekly compensation could lower hourly labour costs by approximately 13 percent.

But others emphasize that longer working hours cannot resolve all of Volkswagen’s structural problems, particularly when factories already face insufficient demand and excess production capacity. Especially as the VW group also faces structural organizational and cost problems that cannot be attributed entirely to competition from China.

On the good news side, the recent analyses suggest that while Volkswagen has a genuine production-cost problem, the evidence does not support the claim that European automotive manufacturing is technologically underdeveloped or that workers’ rights alone are responsible.

Germany’s higher wages, social contributions and negotiated working conditions contribute to labor costs. Yet a high-cost workforce can still be technically productive, as it was for decades.

The struggle is more linked to several issues, like bad management decisions or badly chosen research and development directions.

The relevant economic question is whether higher productivity, product quality, automation and operational efficiency can compensate for higher operational costs.

The Palmela factory is particularly interesting from this point of view: it operates under European labour regulations but reports better hourly productivity and lower factory costs than Emden.

This weakens the argument that EU labour protections necessarily prevent competitive vehicle manufacturing. For example, Portugal workers in general spend more time on sick leaves as Germans – because on a national level, Germans average a 5.8 percent, that is about 14 days. But not in the VW factory – the published 10 percent means around 25 working days, which is almost double of the German average.

While there’s no evidence at all, that the VW group deliberately released the figures to weaken workers’ positions during the difficult negotiations, it’s hard to deny that the effect could easily be exactly that. 

The management was seeking substantial cost reductions and changes in the operational order, meanwhile employee representatives opposed measures threatening established employment guarantees and working conditions.

The leaked comparisons emphasized precisely the indicators most relevant to this conflict: wages, working hours, sick leave, productivity and manufacturing costs.

From management’s perspective, the figures support the argument that German operations required substantial restructuring. They also provided a powerful justification for considering production shifts toward lower-cost countries.

But adjusted with the working hours, the productivity advantage of Chinese factories falls sharply – which leads to a deeper issue: workers’ rights and the European way of living. A decision to make when debating about the future of Das Auto.