Volkswagen Group has introduced a voluntary early retirement scheme for its entire blue-collar workforce across its two manufacturing facilities in India, according to media reports, as it looks to streamline operations and address underutilised capacity in a highly competitive market.

The scheme applies to around 2,300 employees at the group’s Maharashtra plants, which produce models such as the Skoda Kushaq, Volkswagen Virtus and Audi Q3 and Q5 for both domestic and export markets. Despite more than two decades of presence in India, the group’s market share has remained at about 2 per cent, prompting a renewed focus on cost efficiency and workforce alignment.

With production running below installed capacity, the initiative is aimed at matching workforce levels to current operating requirements. Under the scheme, eligible employees are offered compensation equivalent to 75 days of pay for every year of service completed or remaining until retirement, whichever is lower. Additional payouts are available for those who opt in within five to ten days of the offer period. The plan is voluntary and was introduced following discussions and requests from worker unions.

Skoda Auto Volkswagen India, which has led the group’s integrated India strategy since 2018, said the proposal emerged from ongoing dialogue with unions as part of broader workforce restructuring efforts. At the same time, the group continues to explore the possibility of a local partner to support future investments and expansion.

The move comes as Volkswagen contests a $1.4 billion import tax demand, which it has denied. Although the group sells multiple brands in India, including Volkswagen, Skoda, Audi, Porsche, Lamborghini and Bentley, it has struggled to significantly scale its presence in the passenger vehicle market.

The voluntary retirement scheme marks a key step in reshaping Volkswagen’s India operations, as the company seeks to build a more efficient cost structure while signalling its intention to sustain and potentially grow its footprint in the country over the long term.