What's going on?

On Friday, German automaker Volkswagen (VW) said it would cut 30,000 jobs in an effort to reduce costs and divert resources towards its new strategic objective: building electric cars (tweet this).

What does this mean?

A few months ago, VW outlined a big new strategic plan that involved a huge emphasis on electric cars (it wants to be producing 2-3 million electric cars per year by 2025). In order to do that, it has to spend a bunch of money and hire a lot of workers to develop the relevant technology and build those electric cars. To afford that, it�s going to decrease jobs focused on making �regular cars.� Eventually, VW expects to replace all the lost jobs with new ones focused on electric cars.

Why should I care?

For the stock: VW�s workers have a lot of power over the company�s decisions.

VW�s labor union controls half the votes on its supervisory board, which essentially means that it must agree to any big job cuts (similar laws do not exist in most other countries). This has historically limited VW�s ability to make big strategic changes. Worker representatives have agreed to this new plan partly because the job losses will take place over a number of years and will involve only �voluntary� redundancies, like early retirement. But it�s likely the company, and its investors, would prefer even more dramatic changes.



The bigger picture: Batteries are becoming very important.

VW currently sources batteries for its electric cars from external providers, but it�s expected to bring that production in-house as it makes more electric cars. This gels with Tesla�s approach, which has involved building its own giant battery factory. Cars of the future will likely be more about optimizing battery dynamics (e.g. battery life, re-charging speed, etc.) than building out engines. Expect a lot of focus from established companies and, probably, new startups on improving battery technology.