Volkswagen India Launches VRS for 2,300 Plant Workers

The Volkswagen Group is offering a voluntary early retirement scheme (VRS) to all 2,300 blue-collar workers across its two manufacturing facilities in India.

The move is part of a broader, strategic restructuring aimed at optimizing manpower, reducing fixed costs, and strengthening the German automaker’s long-term viability in the highly competitive Indian market.

Below-Capacity Operations Drive Efficiency Push

The underutilization of its manufacturing capacity in India primarily drives the decision to offer the voluntary exits.

Despite operating for more than two decades and housing brands like Volkswagen, Skoda, Audi, Porsche, Lamborghini, and Bentley, the group maintains only around 2% of the total Indian passenger vehicle market share.

Both of the company’s factories, located in the western state of Maharashtra (Pune and Chhatrapati Sambhajinagar, formerly Aurangabad), are currently running below their installed production capacities.

The VRS, which has reportedly been introduced following constructive discussions and requests from worker unions, aims to “rationalise the manpower and align it with current needs,” according to sources familiar with the matter.

The company intends the restructuring to ensure it can continue to pay competitive wages and sustain plant operations efficiently.

Volkswagen India’s Generous Voluntary Retirement Terms

The company designed the financial package under the scheme to incentivize voluntary participation.

Employees who opt for the early exit will receive a payout calculated as 75 days of pay for each year served or each year remaining until retirement, whichever amount is lower.

Furthermore, the company is offering an additional payout to those who sign up within the initial five to ten days of the offer period.

Skoda Auto Volkswagen India Private Limited (SAVWIPL), which spearheads the group’s India strategy, has confirmed the scheme is entirely voluntary.

The company emphasized that the restructuring is intended to strengthen its business and “reaffirm our long-term commitment to India.”

Addressing Market Challenges and Future Focus

The workforce rationalization comes as Volkswagen Group continues to face significant challenges, including a major legal battle concerning a contested $1.4 billion import tax demand from Indian authorities, which the company denies.

Skoda CEO Klaus Zellmer has previously underscored the critical need for growth in India, especially after the brand’s reduced presence in China and exit from the Russian market.

Despite these challenges, the group remains committed to India, viewing it as a strategic market for future growth and exports to regions like Mexico and South Africa.

SAVWIPL is actively seeking a local partner as it prepares for the next phase of investment, particularly focusing on its electric vehicle (EV) segment roadmap.

The two Maharashtra plants currently manufacture key models such as the Skoda Kushaq and Volkswagen Virtus.

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