Volkswagen's Sustainability Chief on China, EVs, and a Boomer Reckoning

Volkswagen's deliveries in China fell 36.6% in the second quarter as local electric-vehicle rivals accelerated gains in a market the German automaker once dominated, the company confirmed to Fortune.

The drop is the clearest commercial signal yet that Volkswagen's four-decade bet on the country is under pressure, even as the group's new sustainability chief, Dirk Voeste, argues that adaptation, not retreat, is the strategic answer.

Voeste, 64, took the job in 2023, he said in an interview during Climate Week in New York, after his daughter's challenge redirected his career. The role had been pitched through a recruiter's email that landed in his spam folder. The listing described a company with €80 billion in revenue. Volkswagen actually pulls in roughly €240 billion a year, Voeste recalled, and he had spent 22 years at BASF.

"You need to clean up the mess your generation has left."

His daughter's verdict, he said, became a private mission statement. "Everything has grown up and got better for society," Voeste said. "And what we're now seeing is it has a price."

The bill is coming due across European manufacturing. China, once the source of Volkswagen's greatest growth and a market where foreign automakers built a modern supplier base, now exports faster-moving, lower-cost EV competition back into Europe while accelerating inside China itself. A Volkswagen spokesperson acknowledged the Chinese auto market declined 20% year-over-year, with Volkswagen's share down 26%, citing changes in subsidy and tax policy, rising fuel prices and ongoing price competition.

"Against this background, we expect the overall market for new vehicles to decline to below 21 million vehicles this year," the company said. "Volkswagen Group China cannot escape this trend."

Voeste rejected the idea that tariffs or annual-report targets could protect legacy manufacturers. "You need to take up competition as a challenge and not throw yourself on [your] back," he said.

How exposed is Volkswagen to China's shift?

Volkswagen built cars in China for decades and became one of the best-known foreign brands there. Chinese companies have since moved into batteries, software and EV manufacturing, compressing development cycles and pushing down costs. The group spokesperson said all-electric vehicle sales in China are still growing steadily and that Volkswagen remains the leader in combustion-engine vehicles, with a market share above 22%.

Voeste framed the response as biology, not bravado. Evolution rewards adaptation, not raw strength, he said. The view underpins Volkswagen's "in China, for China" strategy: local operations and joint ventures as much about intelligence-gathering as defense.

"The amount of vehicles built and brought to the street is phenomenal," he said.

The pressure runs well beyond autos. The U.K. recently overtook Germany in the latest Fortune 500 Europe count, with 76 companies to Germany's 73. Volkswagen is also undertaking a substantial restructuring to regain competitiveness.

What does Regenerate+ actually do?

When Voeste joined Volkswagen, he told CEO Oliver Blume, he saw "trees, but where is the forest?" — many sustainability programs, no unifying frame. The result is Regenerate+, an umbrella strategy spanning nature, people, society and business, with decarbonization, biodiversity and a "circular economy" at its core. The plus sign signals a target beyond net zero: net-positive impact where possible.

Voeste said Volkswagen did not hire outside consultants to write the strategy. More than 100 employees met repeatedly during its design, under a "what happens in Vegas stays in Vegas" rule that let participants speak candidly. After about three or four months, a representative from one Volkswagen brand stood up and said, per Voeste: "Look, I really have an issue. I need your help."

He is pushing circularity as a revenue line, not a cost center. "Circular economy," Voeste said, "is really a new profit pool." Volkswagen calls the approach "reduce and grow."

The strategy remains aspirational. Volkswagen is one of the world's largest automakers but carries the legacy of Dieselgate, the emissions-cheating scandal that cost the company billions of dollars in fines and settlements. In 2020, Volkswagen tied senior executive compensation in part to ESG goals.

What does a baby boomer owe the next generation?

Voeste grew up in Dortmund, the coal-and-steel city whose decline illustrated the cost of clinging to a fading industrial base. His family ran a flower shop and a funeral-services business. The lesson he draws: "Business doesn't stop." He worked a year on a farm after high school. "You can't say, 'Okay, I will fix it tomorrow morning,'" he said. "You need to fix it."

He reads the current energy-and-industry debate through that lens. The risk, he said, is that the U.S. and Europe repeat Dortmund's error by insulating themselves from electrification or continuing to invest in technologies whose competitive logic is fading.

"The next generation always had it better than the earlier ones," he said. "And now the first time our kids are saying, 'Maybe that's bending.'"

Voeste argues that Volkswagen's scale makes it the right vehicle for his leverage. "If Volkswagen can reduce its emissions by 10% or whatever—15 or 20 or 30%—my leverage is even bigger," he said.

He dismissed corporate sustainability theater. "You have to live it," he said. "If you don't live it, somebody [will] say, 'Come on, it's a Potemkin, it's a fake.'" The obligation falls on executives who speak fatalistically about climate, China or Europe's decline, he argued.

"A lot of people who are so pessimistic, they should look inward themselves," Voeste said. "They need to live it, too." He paused. "When we can move the needle, we should move the needle."

That imperative will be tested as Volkswagen absorbs the China shock, rolls out Regenerate+ across its brands, and tries to prove that a 250,000-employee manufacturer can shrink its footprint while still carrying the German industrial model it inherited.