The city of Volkswagen

Once upon a time in Germany, there was an urban legend. It was the story of a metropolitan area created in a test tube, where everything functioned perfectly. It had been founded by the National Socialists in 1938 to build the people’s car, the Volkswagen, the Beetle that would set millions of Germans on the move. But the original sin of its birth had not prevented Wolfsburg, after the zero hour of defeat in the Second World War, from reinventing itself as a symbol of German rebirth and Rhineland capitalism – an efficient and functional infrastructure serving the Federal Republic’s largest industry. It may not have been the most beautiful of cities, but for seven decades this town in Lower Saxony happily embodied the Volkswagen: jobs, homes, schools, nurseries, sports and cultural centres, museums, the football team – everything was funded by the company, a leader in Europe and across the globe.

Now the fairy tale seems to be drawing to a close. As Stefano Cingolani has reported in these pages, the car manufacturer is in the midst of an existential crisis, with its profits in freefall, its market position increasingly precarious, and its ‘business model’ under threat as never before from a perfect storm triggered by the excessive internal constraints of a complicated governance structure, high energy prices, Donald Trump’s tariffs and, last but not least, the Chinese nightmare. From Eldorado, where for many years Volkswagen made its biggest profits, China is in fact in danger of becoming its grave. By focusing on electric cars, thanks in part to generous subsidies from the Communist government, the Chinese industry is eroding the market share of all German car manufacturers, and VW in particular. What is more, Chinese brands are beginning to establish significant footholds even at the heart of the European market.

It had already become clear in recent months that the results for the first half of this year would be disastrous, when Volkswagen’s management announced a plan for significant cost-cutting, which included cutting 100,000 jobs (out of 660,000 employees by the end of 2025) and closing at least four plants. The plan, however, has since stalled due to opposition from trade unions and the state of Lower Saxony within the Supervisory Board, the governing body where ‘Mitbestimmung’ – the co-determination principle at the heart of the Rhenish model – applies. But the official figures, released in mid-July, have laid bare just how dire the situation is. Profits between April and June fell to €1.54 billion after tax, a 33 per cent drop compared with the same quarter of the previous year. And whilst turnover for the first half of the year remained almost unchanged from 2025, at around €158 billion, operating profit fell from €6.7 billion to €5.9 billion, with 400,000 fewer cars sold worldwide.

“Volkswagen is currently going through a ‘Nokia moment’,” says Martin Geissler of the consultancy firm Argon&Co. The reference is to the famous Finnish company, which dominated the mobile phone market at the start of the millennium but underestimated the technological revolution brought about by smartphones and failed to address it in time, leading to an inexorable decline that culminated in the forced sale of its mobile division to Microsoft in 2013.

But it is Wolfsburg we wish to discuss here. At first glance, it is not exactly a symbol of decline, still boasting the highest per capita income of any German city – clean, prosperous, meticulously planned and organised. Yet it is so dependent on and inextricably linked to Volkswagen that it faces the future with uncertainty and fear: of its 130,000 inhabitants, as many as 62,000 work for the car manufacturer. “Without VW, the city would die,” comments historian Alexander Gutzmer. It has already been dubbed the “Detroit syndrome”, after the Michigan “company town” that was once the automotive capital of the world, but which could not withstand the oil crises of the 1970s, a lack of innovation, Japanese competition and the recessions that led to its historic bankruptcy in 2013. Just as Detroit does for the United States, Wolfsburg reflects the fate of Germany’s manufacturing heartland: the story of a city built on the dream of mobility, modernity and prosperity, but which today must confront the limitations of that model.

Whilst history speaks from the corners of every city, in Wolfsburg it cries out. Hitler envisioned it as the ‘Stadt des KdF-Wagens’, the city of cars, where the acronym stood for Kraft-durch-Freude, ‘strength through joy’, the Nazi organisation that managed the Germans’ after-work activities and leisure. An urban centre built from scratch, where the workers who built the first mass-produced car could live. Social engineering and propaganda: the vision of the modern employee – disciplined and industrious, at peace with himself – serving a national technological project for the Reich, which was intended to last a thousand years. Unlike the Soviets, who dismantled factories, plants and even railway tracks piece by piece and took them away, the British – who liberated and occupied this part of Germany – were far-sighted enough not to dismantle the Volkswagen plants after the war. And the rest is history. From that moment on, the company and the city became the true showcase of the Wirtschaftswunder, the economic miracle that would make West Germany Europe’s leading economy. Of course, whenever the company slowed down, Wolfsburg came to a standstill too: between 1991 and 1994, the brand’s difficulties led to a 30 per cent drop in the business tax revenue flowing into the council’s coffers. Last year, the decline was 40 per cent, forcing the council to introduce austerity measures and cut back on spending. Wolfsburg lives and breathes Volkswagen.

To understand the uniqueness of the Wolfsburg model, one must visit the ‘Markenpark’, the brand park opened by VW in 2000. Twenty-eight hectares framed by bodies of water and Japanese-inspired pine groves, where every brand within the holding company has its own pavilion. A sinuous steel sculpture soaring 25 metres above a pond distinguishes the Porsche pavilion. Audi offers the “House of Progress”, a temple to technology. SEAT uses white concrete to embody a Mediterranean spirit. “Every pavilion is unique. It was an attempt to translate a brand’s philosophy into architecture. A postmodern idea, linked to a time when capitalism sought to be seen as likeable and a bearer of cultural value,” says Gutzmer.

At the turn of the millennium, even the state of Lower Saxony – which owns 30 per cent of Volkswagen and has always held a blocking minority – was trying to shake off the dull image associated with Wolfsburg. At the Federal Chancellery sat the Social Democrat Gerhard Schröder, a charismatic and impetuous man from Hanover, known as the ‘bosses’ comrade’ due to his habit of frequently and willingly associating with the major Rhineland capitalists. As Minister-President of the state, Schröder had worked tirelessly to secure Hannover’s place as the global showcase for EXPO 2000. The Scorpions, the local band that had become a global icon in 1990 with ‘Winds of Change’, were at the height of their success. And Ferdinand Piëch, the company’s chief executive, was determined to prove that VW produced not only cars but also culture. Even Zaha Hadid had been enlisted for the purpose, and the Iraqi-born starchitect had designed the Phaeno Science Centre, an interactive science museum opened in September 2005, so imaginative that it was included the following year in the list of the seven wonders of the modern world. The New York Times described it as “a mesmerising work of architecture, the sort of building that completely transforms our vision of the future”.

Today, the zeitgeist is shifting. The Markenpark continues to operate, a favourite destination for families and tourists. But a certain melancholy prevails. Visitor numbers are falling: 1.7 million in 2024 and 2025, down from over 2 million in 2023. Some of the pavilions are even changing their names: the one dedicated to Lamborghini, originally conceived as a showcase for a sports car legend, is set to become a ‘gaming centre’, featuring simulated racing, virtual reality and video game tournaments. The Miuras and Diablos can now be seen at the Zeithaus, the car museum within the park. The impression, shared by marketing experts, is that ‘branding’ has had its day and that the very idea of a car brand as a cultural and architectural asset is nearing its end, all the more so at a time when Volkswagen’s current situation is not exactly a success story.

And perhaps few things embody the Wolfsburg blues more than the fortunes of the football team, another part of its identity and a symbol of better times. Founded in 1945, the Verein für Leibesübungen (Association for Physical Exercise), or simply VfL Wolfsburg, has been a fixture in the Bundesliga, Germany’s top flight, for years, winning the title in 2009 under the guidance of the legendary Felix Magath. In 2015, it won the no less prestigious German Cup. Owned by Volkswagen, the club plays at the Volkswagen Arena, a 30,000-seat gem inaugurated in 2022. But over the last seven years, the decline has been relentless: six managers, 180 million spent and, most recently, in the season that ended in May, the humiliation of relegation to the second tier. Oliver Blume, the head of Volkswagen and VfL’s number one fan, has pledged to continue funding the club even in the event of relegation to the lower division, but it is all too easy to draw a parallel between the fate of the company and that of the team.

The parallel with Detroit is not entirely accurate, but it is certainly instructive. Both cities grew up around a single industry, which was also part of their national identity. However, the decline of the American city occurred rather rapidly, whilst that of Wolfsburg is slower but no less dangerous. Efforts at diversification remain modest in scale compared to the magnitude of the challenge: Wolfsburg AG, a public-private partnership between the city and VW, has attempted to attract start-ups and develop a services sector less dependent on the automotive industry. The problem is that it is the entire ‘German model’ that is under scrutiny. And the very factors that once made the Federal Republic a formidable giant – precision engineering, incremental innovation, dense value chains – now risk proving to be fatal handicaps in a faster and more volatile global market. The comparison with Detroit is an exaggeration; after all, VW is still making a profit and the city is far from social collapse, but Wolfsburg is the most accurate reflection of an industrial economy that is no longer sustainable in the medium to long term.

Open from May until the end of September at the Kunstmuseum – another of Volkswagen’s gifts to the city – ‘On Nervous Grounds’ features works by Cindy Sherman, Jeff Walls and Rebecca Horn. ‘Between Disillusionment and Reality’ reads the exhibition’s subtitle, which explores the emotional paralysis of our times, where political and social tensions plunge people into a collective state of nervousness and vulnerability. It is happening all over the world. But in Wolfsburg in particular.