Volkswagen announced that its operating profit margin for the year will likely fall at the lower end of its projected 5.5% to 6.5% range. This downgrade is partly due to a profit warning from Porsche, in which Volkswagen holds a 75% stake. However, this updated forecast does not yet account for the possible financial implications of ongoing U.S. trade tensions. The company cited difficulties in making definitive financial projections due to the shifting nature of American tariff policy. Volkswagen’s CFO Arno Antlitz emphasized that the situation was still evolving, and it was premature to draw any firm conclusions regarding the potential impact of the tariffs.
Antlitz reaffirmed Volkswagen’s commitment to cooperating with policymakers while highlighting the importance of the company’s cost-cutting initiatives in navigating this challenging landscape. He noted that growing battery-electric vehicle (EV) sales, particularly in Europe where volumes more than doubled in the first quarter, are currently weighing on margins. However, he pointed to the upcoming €25,000 ID.2 model, to be manufactured in Spain, as potentially the first EV from the group to match the profit margins of traditional combustion engine vehicles. Antlitz acknowledged that significant pricing support remains necessary for EVs to become sustainably profitable.
The broader automotive sector is also grappling with tariff-related unpredictability. Several automakers, including Mercedes-Benz, Stellantis, General Motors, and Volvo Cars, have already withdrawn their financial forecasts due to the volatility in trade policy. Porsche, which lacks U.S. manufacturing facilities, reported a financial hit of at least €100 million during April and May alone as a result of the tariffs.
Volkswagen is particularly exposed to the trade tensions, given that premium brand Audi also does not currently produce vehicles in the United States. The group is considering increasing its U.S. manufacturing presence, potentially by producing more models at the new Scout brand factory under construction in South Carolina, although no definitive decisions have been made yet.
Meanwhile, Volkswagen’s internal cost-reduction program, which was agreed upon with unions late last year, is progressing steadily. The company has already reduced factory costs and cut about 7,000 jobs at the VW brand level. Despite these efforts, Volkswagen posted a 40% decline in first-quarter earnings. It now expects net cash flow for the year to land near the lower end of its €2 billion to €5 billion forecast, with net liquidity remaining close to €34 billion.
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