Volkswagen experiences a substantial decline in profit, surpassing one-third of the original earnings - Volkswagen suffers significant loss in profits, surpassing one-third of its original amount
Volkswagen, the Wolfsburg-based DAX company, has reported a significant drop in profits for the second quarter of 2025. The operating result fell by nearly 29% to €3.83 billion, resulting in an operating margin of 4.7%, missing analyst expectations.
The poor performance can be attributed to several factors, including the impact of U.S. import tariffs and restructuring costs. The tariffs caused €1.3 billion in losses, while restructuring efforts added another €700 million to the expenses.
Despite slightly increased deliveries, revenue for the second quarter was down 3% at €80.6 billion. This decline was also influenced by the shift to electric vehicles (EVs), which currently have slimmer profit margins than traditional combustion vehicles. EV sales increased by 62% globally in the first half of 2025, but the economic trade-offs have weighed on profitability.
Regionally, Volkswagen experienced a 16% drop in North American sales linked to tariffs, while sales in South America and Western Europe grew 19% and 2% respectively.
In response to the challenging environment, Volkswagen has revised down its full-year profit outlook. The company now expects an operating return on sales between 4% and 5%, significantly lower than the previous guidance of 5.5% to 6.5%. The company is focusing on strategic adaptability to navigate these headwinds, including plans to cut 35,000 global jobs by 2030 to restore profitability.
It's worth noting that analysts had already forecast an average operating profit margin of less than 5%. Despite the disappointing results, the operating result for the second quarter met analysts' expectations.
Looking ahead, Volkswagen expects continued challenges in 2025 but is focusing on strategic adaptability to navigate these headwinds. The company aims to capitalise on the opportunities presented by the transition to electric mobility while minimising the associated costs and risks.
[1] Volkswagen AG Press Release, Q2 2025 Results [2] Reuters, Volkswagen to cut 35,000 jobs by 2030 to restore profitability [3] Bloomberg, Volkswagen's Shift to Electric Vehicles Weighs on Profitability [4] Financial Times, Volkswagen's Underlying Margin Remains Near Previous Guidance Despite Profit Drop
- In an effort to restore profitability and adapt to the challenging environment, Volkswagen has planned to focus on vocational training for their workforce, with the aim of improving industry efficiency and fostering a more productive community policy.
- Recognizing the rapid growth and significance of the electric vehicle market, Volkswagen has decided to invest in finance projects for the development of innovative automotive technology, particularly in the area of transportation solutions related to EV infrastructure.
