The largest automaker in Europe is facing another challenging year. Volkswagen announced today (March 10, 2026) a sharp decline in its operating profits and projected only a modest recovery for its shrinking profit margin.
Tariffs and China Weigh on Results
According to Automotive News Europe, the German automaker is feeling pressure from U.S. tariffs and intensifying competition in China. Like its peers, Volkswagen has faced mounting headwinds across major markets: American import duties are costing the company billions, while local Chinese rivals continue eroding its market share in the world’s largest auto market.
Profit Margin Outlook Narrows
Volkswagen expects its adjusted operating margin to land between 4% and 5.5% in 2026—down from 2.8% in 2025 and 5.9% in 2024. Analysts surveyed by Visible Alpha forecast a 5.2% margin for this year, at the upper end of the company’s guidance range.
Sharp Drop in Operating Profits
Operating profits fell by more than half in 2025, landing at €8.9 billion—below analyst expectations of €9.4 billion. The decline was driven by tariff-related costs and a costly strategic pivot at Porsche, which paused its electric vehicle transition last year amid weak demand.
Revenue Stagnation Expected
Revenues held steady at €322 billion in 2025, with little growth expected in 2026. Volkswagen forecasts revenue growth between 0% and 3% for the year—matching the high end of analyst expectations.
Cost-Cutting Remains Priority
Chief Financial Officer Arno Antlitz acknowledged that product launches and restructuring efforts in 2025 were critical to strengthening the company’s resilience. However, he noted that the adjusted operating margin of 4.6%—after accounting for restructuring—‘is not sufficient in the long term.’ Volkswagen plans to continue strict cost reductions across its operations.
Cash Flow Improvement Sparks Debate
In January 2026, Volkswagen reported €6 billion in net cash flow for 2025—a significant improvement over earlier forecasts of zero cash flow. The news triggered a rally in its stock price but also drew criticism from labor unions, who questioned the result amid sweeping job cuts.
Massive Workforce Reduction Planned
The group plans to eliminate around 50,000 jobs in Germany by 2030. This includes a major restructuring at Porsche, whose operating profits nearly vanished in 2025—plummeting 98% to just €90 million.