Volkswagen Group Profit Plunges Amid Tariffs & EV Transition Challenges

Volkswagen Group navigated a challenging first half of 2025, reporting a significant decline in operating profit amidst complex global trade tensions and the costly, yet essential, transition to electric vehicles (EVs). This contraction underscores broader industry pressures and strategic shifts within the automotive sector, demanding agile adaptation from major players.

• Volkswagen Group’s operating profit fell 33% to €6.7 billion in the first half of 2025.
• Profitability was significantly impacted by increased US import tariffs, €700 million in restructuring costs, and a growing share of lower-margin EV sales.
• Full-year sales revenue guidance was revised downwards to align with the previous year’s figure, from an earlier 5% growth forecast.
• The operating return on sales projection was also reduced to 4-5% from 5.5-6.5%.
• Despite a negative net cash flow of €1.4 billion, the company reported robust 62% growth in EV order intake.
• Future financial outlook remains highly contingent on ongoing EU-US trade negotiations concerning tariffs.

Financial Performance Amidst Headwinds

For the first half of 2025, Volkswagen Group reported a 33% decline in operating results, reaching €6.7 billion, even as sales revenue remained stable at €158.4 billion. This significant profit erosion was primarily attributed to several factors: increased US import tariffs, €700 million in restructuring expenses, and a rising share of sales derived from lower-margin electric vehicle models. Arno Antlitz, Chief Financial Officer, clarified that excluding these exceptional items, the second-quarter operating margin stood at nearly 7%, aligning with the company’s internal projections. A negative net cash flow of €1.4 billion for the period further intensified the imperative for cost optimization. Despite these notable financial headwinds, Volkswagen’s shares experienced a rise of over 3% following the announcement, reflecting a nuanced market reaction.

Regional Dynamics and EV Momentum

Regionally, the United States saw a 16% decline in sales, largely attributable to tariffs. This downturn was partially mitigated by robust 19% growth in South America and solid performances across Western Europe, which saw a 2% increase, and Central & Eastern Europe, up by 5%. Although new car sales across the EU collectively decreased by 1.9% year-on-year, as reported by the European Automobile Manufacturers’ Association (ACEA), Volkswagen Group notably expanded its sales within the bloc by 2.3%. Demand for electric vehicles proved particularly strong, with order intake for EVs surging by an impressive 62%. CEO Oliver Blume underscored the company’s reinforced leadership position in European electric mobility, having secured a commanding 28% market share complemented by robust order backlogs.

Revised Financial Outlook and Trade Uncertainties

The automaker has consequently revised its full-year financial guidance for investors. Sales revenue is now projected to align with the previous year’s figure, representing a significant downward adjustment from its earlier forecast of 5% growth. The forecast for operating return on sales was also adjusted downwards, now projected to be between 4% and 5%, a reduction from the prior range of 5.5% to 6.5%. Crucially, this revised outlook heavily depends on the trajectory of US import tariffs, with scenarios ranging from a continued 27.5% rate to a potential 10% reduction, underscoring the significant uncertainties embedded in current trade policy.

These financial adjustments coincide with critical EU-US trade negotiations, urgently aimed at resolving tariff disputes before an August 1 deadline. The US administration, led by President Donald Trump, has notably threatened the EU with 30% tariffs should an agreement fail to materialize, prompting the EU to prepare its own comprehensive retaliatory measures. Volkswagen’s CEO expressed a strong reliance on both the European Commission and the US government to achieve a balanced and sustainable resolution on these pivotal tariff matters, thereby underscoring the automotive industry’s profound vulnerability to evolving geopolitical trade dynamics.