Volkswagen doubles planned job cuts to 100,000 as car sector contracts
German industrial production fell 1.1% in July from June, Germany’s statistics agency Destatis said Monday — the steepest monthly decline since August 2025. Economists polled last week by The Wall Street Journal had forecast a 0.1% increase.
Output was flat in June, Destatis said. The July decline was driven by a 9.2% monthly drop in car sector production, with part of the weakness attributed to the retooling of a plant for electric-vehicle manufacturing. Volkswagen’s board last week approved doubling planned job cuts to 100,000 as the company confronts competition from China and U.S. tariffs.
Despite the July contraction, output was 0.4% higher in the May-through-July period than in the prior three months, and factory orders have risen for three straight months, according to Destatis.
Part of the variation reflects factors specific to the war environment: Asian rivals were hit harder by the closure of the Strait of Hormuz, and German companies stockpiled goods in anticipation of higher costs and supply disruptions tied to the conflict. The German government’s fiscal stimulus on defense and infrastructure investments has also begun to feed through to factory activity.
Low water levels in Germany’s rivers, caused by recent heatwaves, are expected to hamper production in August.
“The data serves as a reminder of how fragile the recovery of the German economy is,” Carsten Brzeski, an economist at Dutch bank ING, said in a note to clients.
“Looking ahead, the war in the Middle East, which is slowly turning into a forever war, keeping oil prices at elevated levels, as well as the likely upcoming shock of higher gas prices in the next heating season and renewed trade tensions, pose risks to the German outlook,” Brzeski added.