Volkswagen Group experiences a drop in earnings during the second quarter period - Lack of Input from Stakeholders: The Commission found no feedback from relevant parties during its proceedings.
Volkswagen, the German automotive giant, has reported a profit decline of approximately a third in the second quarter compared to the previous year. The operating profit dropped to €3.83 billion, a significant decrease from the same period last year.
The decline was primarily due to several factors. U.S. import tariffs caused significant cost increases, leading to a €1.3 billion hit in the first half of 2025. These tariffs pressured pricing and supply chains, particularly affecting North American sales and leading to tighter inventories and delayed product launches.
Internal restructuring costs also played a role. Volkswagen incurred approximately €700 million in restructuring expenses aimed at workforce reductions and operational realignment. This included plans to cut 35,000 jobs in Germany by 2030 to save costs.
The strategic transition towards electric vehicles (EV) was another contributing factor. While EV sales volumes grew, these vehicles generally have slimmer profit margins compared to traditional combustion models. The company's shift towards EV production required heavy investment in battery technology and supply chains, which eroded short-term earnings.
As a result, the group's earnings were affected by high restructuring costs, and the strong performance of less profitable electric vehicles. The previously forecasted revenue growth was up to 5%, but CEO Oliver Blume now aims for revenue at the same level as last year, instead of up to 5% growth.
The operating margin of the group was 4.7%, down from the previously predicted 5.5-6.5%. If US tariffs are reduced to 10%, the upper end of the forecast range for the operating profit margin will be targeted. The forecasted operating profit margin range (4.0-5.0%) does not include the impact of possible tariff reductions to 10%.
Despite slightly increased deliveries, revenue was down 3% at €80.6 billion. The operating result fell by nearly 29% to €3.83 billion. The group expects lower profits for the current year due to these factors.
Analysts had already predicted an average operating profit margin of less than 5%. The operating result was in line with these expectations. Volkswagen's profit decline in Q2 2023 reflects the combined impact of U.S. tariffs raising costs, restructuring expenses from workforce and operational overhauls, and the financial strain of a strategic transition toward electric vehicles with lower short-term profitability.
[1] Tariffs Pressure Volkswagen's Profit Margins [2] Volkswagen's Shift Towards Electric Vehicles Erodes Short-Term Earnings [3] Volkswagen's North American Sales Affected by Tariffs and Tighter Inventories [4] Volkswagen to Cut 35,000 Jobs in Germany by 2030 [5] Volkswagen's Q2 2023 Profit Decline: A Breakdown of the Factors
- Given the financial strain from U.S. tariffs, Volkswagen is considering community policies that prioritize vocational training for its workforce, as a means to reduce costs and maintain productivity while navigating industry changes.
- In light of the rising costs and competition in the automotive industry, Volkswagen is planning to invest in strategic partnerships within the finance sector for potential business collaborations focusing on vocational training programs to upskill its workforce, thus improving the company's long-term profitability.
