Audi is reducing its workforce by 7,500, the latest example of dramatic changes roiling the global autos industry.
The German premium car brand announced Tuesday that it would cut 9,500 jobs by 2025, or roughly 10% of its global workforce. At the same time, it will create 2,000 jobs focused on electric mobility and other new technology.
Audi, which is owned by Volkswagen (VLKAF), said the job cuts would be achieved through turnover and retirement. It guaranteed jobs for its remaining workers through 2029. The changes will free up €6 billion ($6.6 billion) over 10 years that Audi plans to invest in the cars of the future.
The cuts are part of an agreement with worker representatives that allows two major Audi factories in Germany to be overhauled to make electric vehicles. Audi expects the plants in Neckarsulm and Ingolstadt, where its headquarters are located, to produce a combined 675,000 cars a year.
Established carmakers around the world are ripping up their business models in the hope of adapting to a new world in which electricity replaces gasoline and diesel.
Volkswagen is no exception. The group, which also owns Porsche, Bugatti, Skoda and Lamborghini, is spending tens of billions of dollars to make an electric or hybrid version of every vehicle in its lineup, and it plans to launch 70 new electric models by 2028.
Audi will play a major role in that transformation. The brand has launched its first electric SUV, the e-Tron, which is made at a plant in Brussels that used to churn out small cars powered by fossil fuels. Electric cars, which have fewer parts than those powered by internal combustion engines, require fewer workers to assemble.
But they cost a lot to develop. The scale of the investment required is forcing some companies to find partners and turning others into acquisition targets. Fiat Chrysler (FCAU) and Peugeot owner PSA (PUGOY) Group announced plans to merge last month, creating a major new force in the industry. German carmakers BMW (BMWYY) and Daimler (DDAIF) have formed a joint venture that will develop driverless technology. Honda (HMC) has invested in General Motors’ self-driving car unit.
The changes comes amid a slump in global auto sales, which could worsen as economies around the world slow or even fall into recession. Fitch Ratings said Monday that it expects global car sales to drop by around 3.1 million this year — a sharper fall than in 2008, when the world was gripped by the financial crisis.