Volkswagen stung by tariffs, China battle as profit halves

[WOLFSBURG, GERMANY] Volkswagen reported a slump in operating profit on Tuesday (Mar 10) and forecast only a modest recovery for its dwindling margin.

Europe’s largest carmaker is in for another tough year, dominated by tariffs and the battle to win back China.

Like its rivals, Volkswagen has contended with pressures across major markets, with US tariffs costing the company billions and local competition eroding its share in China, the world’s biggest car market.

The German car group, whose subsidiaries Porsche and Audi have also come under strain, expects an operating margin of between 4 and 5.5 per cent in 2026, after 2.8 per cent in 2025 and 5.9 per cent in 2024.

Analysts polled by Visible Alpha expect a 5.2 per cent margin this year, at the higher end of the company’s forecast range.

Fundamentally different environment

Chief executive officer Oliver Blume said: “We are operating in a fundamentally different environment.”

The carmaker’s operating profit more than halved in 2025 to 8.9 billion euros (S$13.2 billion), missing analysts’ forecast of 9.4 billion euros. Its profit was dragged by tariffs and a costly strategic shift at Porsche, which paused its transition to electric last year amid weak demand.

Revenue was flat at 322 billion euros, with scant hopes for growth in 2026, during which the company expects its revenue to develop in a range of zero to 3 per cent. Analysts’ expectations were at the higher end of the scale.

Chief financial officer Arno Antlitz said that product launches and restructuring measures in 2025 were important to boost Volkswagen’s resilience.

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“But the operating margin of 4.6 per cent adjusted for restructuring is not sufficient in the long run,” he said, adding that Volkswagen would continue to rigorously reduce costs.

In January, Volkswagen reported a 2025 net cash flow of six billion euros, a major improvement from a forecast of no cash flow.

This triggered a share rally but also drew criticism from trade unions, which questioned the result as the company was engaging in sweeping job cuts.

The group plans to make around 50,000 job cuts by 2030 in Germany.

This includes a restructuring package at Porsche, whose operating profit disappeared almost entirely in 2025, falling by 98 per cent to 90 million euros. REUTERS