WOLFSBURG, March 10 (Reuters) - Volkswagen expects its dwindling profit margin to recover this year after a bruising 2025 hit by tariffs, tough competition from China and a costly shift towards
Volkswagen stung by tariffs, China battle as profit halves
By Rachel More
Volkswagen Faces Financial Struggles Amid Global Challenges
WOLFSBURG, Germany, March 10 (Reuters) - Volkswagen is in for another tough year dominated by tariffs and the battle to win back China, after Europe's largest carmaker reported a slump in operating profit on Tuesday and forecast only a modest recovery for its dwindling margin.
Like its rivals, Volkswagen has contended with pressures across major markets, with U.S. tariffs costing the company billions and local competition eroding its share in China, the world's biggest car market.
War in the Middle East is also testing the group's nerves, threatening luxury-car demand at a time when Audi and Porsche <P911_p.DE> are already grappling with weaker sales and tighter margins.
"We are noticing that the business model that carried us for decades no longer works in this form," CEO Oliver Blume said. "We are simply seeing how volatile and fragile our world is, with new issues arising every month."
Mounting Problems in Key Markets
Tariffs and Competition
Undergoing a major product offensive and sweeping cost cuts, the German auto group has a steep climb to its targeted operating margin of 8% to 10% by the end of the decade.
The company expects an operating margin of between 4% and 5.5% in 2026, after 2.8% in 2025. Analysts polled by Visible Alpha expect a 5.2% margin this year, at the higher end of the company's forecast range.
Impact on Profit and Revenue
The carmaker's operating profit more than halved in 2025 to 8.9 billion euros ($10.4 billion), missing analysts' forecast of 9.4 billion euros, 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, when the company expects revenue to develop in a range of 0% to 3%.
Again, analysts' expectations were at the higher end of the scale.
50,000 Job Cuts Planned in Germany
Cost-Cutting and Restructuring
CFO Arno Antlitz said product launches and restructuring measures in 2025 were important to boost Volkswagen's resilience.
"But the operating margin of 4.6% adjusted for restructuring is not sufficient in the long run," he said, adding that Volkswagen would continue to rigorously reduce costs.
Job Reductions and Porsche Restructuring
In January, Volkswagen reported a 2025 net cash flow of 6 billion euros, a major improvement from a forecast for no cash flow, which triggered a share rally but also drew criticism from trade unions who 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% to 90 million euros.
(Additional reporting by Amir Orusov and Christina Amann, editing by Friederike Heine, Thomas Seythal and Louise Heavens)
