FAW-Volkswagen Cancels Two Years of Bonuses Worth Nearly Half of Some Pay
Employees at FAW-Volkswagen, the long-running joint venture between China’s FAW Group and Germany’s Volkswagen, were told verbally last week that the company’s annual BD bonus will not be paid for the 2025 or 2026 performance years, according to multiple staff members. The bonus, known internally as the “baodan” or insurance policy, is tied to annual sales and business results and normally accounts for roughly 40 to 45 percent of an employee’s total yearly income.
Because the sum is large and fixed once a year, workers have long treated BD as their year-end bonus. Under the usual schedule, the payout for a given year lands in an employee account from August of the following year. That timing means the 2025 award would have been due to appear from August 2026, and the 2026 award from August 2027. Cancelling both years removes a chunk of expected pay stretching well into the future.
The decision fits a broader cost-cutting push across China’s established carmakers. For two decades, joint ventures like FAW-Volkswagen were among the most sought-after employers in Chinese manufacturing, offering stable salaries and generous annual payouts on the strength of foreign-brand sedans that dominated the market. That model has been eroded as domestic electric-vehicle makers such as BYD, Geely’s electric brands and Xiaomi win buyers with software-heavy cars and aggressive pricing.
FAW-Volkswagen still sells large volumes, but the pricing power that funded its bonus culture has weakened. Showroom discounts have become routine, and dealers have complained about thin margins. When revenue per car falls, annual bonuses tied to sales and profit are the first line item to be revisited, because they are discretionary and easy to adjust without changing base salaries.
The bonus cut is also a signal about how foreign-brand joint ventures are restructuring for a slower, leaner phase in China. Volkswagen has been rethinking its China operations, leaning more on local partners and local engineering talent to speed up electric models. Rivals including BMW’s Shenyang joint venture and several others have trimmed factory staff or reorganized production as the market shifts toward electric cars. Pay packages are part of that reset.
For employees, the change is personal. A bonus worth nearly half of annual income is not a rounding error; it shapes mortgages, school fees and savings plans. Workers who joined the company expecting a reliable annual top-up now face the prospect of two years without it, and the verbal notice, rather than a written policy, has left some unsure how firm the decision is.
The wider question is whether other joint ventures follow. China’s car market is still huge, but the profit pool has moved toward battery and software suppliers and a handful of fast-growing electric brands. Legacy joint ventures that once set the benchmark for pay in the industry may find that their bonus schemes are the easiest cost to cut, even as they try to hold on to the engineers and managers they need for the electric transition.
What happens next will be watched closely by workers across the sector: whether the cancellation is confirmed in writing, whether any partial payment is offered, and whether other foreign-brand joint ventures announce similar changes in the coming months.