Volkswagen is offering factory workers in India early departure as it restructures its operations

Volkswagen Group is offering early retirement to all of its 2,300 employees at its two factories in India, sources said, as the carmaker tries to overcome obstacles to growth in the world’s third-largest car market.Volkswagen Group has begun a broader restructuring in India, where it is challenging the country’s largest import tax demand yet of $1.4 billion for alleged duty evasion. It has denied the claims.

The group, which sells Volkswagen, Skoda, Audi, Porsche, Lamborghini and Bentley brands in India, has just 2% market share in India despite more than two decades of operations.

Skoda CEO Klaus Zellmer in particular has spoken about the need for growth in India as the brand no longer has a major presence in China and has left Russia.

Factories are operating below capacity

Both Volkswagen factories in India are operating below their installed production capacity.The group has introduced an early retirement scheme for its workers to “rationalize manpower and align it with current needs,” one of the two sources told Reuters.

The source said the company wanted to ensure it could continue to pay competitive wages and keep its factories running.

Both sources declined to be named due to the sensitivity of the matter. Skoda Auto Volkswagen, which has been leading the group’s India strategy since 2018 and is looking for a local partner to complete the next phase of investment in the country, said the early retirement scheme is voluntary and was introduced at the request of the unions.

Meanwhile, the company’s restructuring program aims to strengthen its business, “reaffirming our long-term commitment to India,” Skoda said in a statement.

The scheme will offer employees 75 days’ pay for each year of service or each year remaining until retirement – whichever is lower, the sources said, adding that those who sign up within five to 10 days will get an additional payout.

Both plants are located in India’s western state of Maharashtra, where the company produces cars including the Skoda Kushaq SUV, Volkswagen Virtus sedan and the Audi Q3 and Q5, for sale in India and export to markets such as Mexico and South Africa.