Volkswagen Group Profit Plummets Amid Trade Tensions

Automaker Revises Forecasts as Tariffs Bite

The Volkswagen Group experienced a significant 33% drop in operating results for the first half of the year, reporting 6.7 billion euros. Turnover also saw a slight decline of 0.3% to 158 billion euros.

Global Headwinds Impact Financial Performance

The automotive giant, parent to brands like Audi, Seat, Skoda, and Lamborghini, has consequently lowered its financial outlook for the entire year. This revision accounts for the impact of new import duties, escalating political uncertainty, and widening trade restrictions.

Geopolitical tensions, intensified competition, and fluctuating raw material and energy markets further challenge the group. Stricter emissions requirements also add to the operational pressures.

Sales Remain Steady, Regional Shifts Noted

Despite the profit squeeze, vehicle sales remained robust, with 4.36 million units delivered in the first six months of 2025, a marginal increase from 4.34 million in the same period last year. Growth in South America (+19%), Western Europe (+2%), and Central/Eastern Europe (+5%) counteracted declines in China (-3%) and notably North America (-16%).

These regional shifts were partly attributed to factors such as the cost of compliance with Co₂ regulations, adverse currency exchange rates, and pricing pressures. The increasing proportion of fully electric vehicles within the sales mix also contributed to the result’s impact.

US Tariffs Create Trade Friction

A major contributing factor to the financial strain stems from the United States’ imposition of a 25% tariff on global car imports in early April, augmenting an existing 2.5% duty. While the UK and Japan have negotiated reduced rates of 10% and 15% respectively, the European Union has yet to reach a similar accord.

Electric Vehicle Orders Surge in Europe

In Western Europe, vehicle orders have seen a substantial 19% increase. New model introductions across all powertrain types, including the VW ID.7 Tourer, Cupra Terramar, Škoda Elroq, Audi Q6 e-Tron, and the Porsche 911, fueled this demand. Notably, orders for fully electric vehicles experienced a remarkable 62% surge.

Outlook Adjusted Amid Market Volatility

The Volkswagen Group now anticipates sales growth to mirror last year’s performance, with an operating margin forecast between 4% and 5%. This is a downward revision from earlier projections of up to 5% sales growth and a gross operating margin of 5.5% to 6.5%.

This recalibration reflects the dynamic and often unpredictable nature of the global automotive market. For instance, in 2023, the global automotive market saw a 7% increase in sales, reaching 78.5 million vehicles, indicating a general rebound post-pandemic, according to the International Organization of Motor Vehicle Manufacturers (OICA).