Profits at Volkswagen collapsed by 40 per cent in the first quarter as it set aside more than €1 billion to address restructuring costs and potential penalties for missed emissions targets.
Operating profit at the Europe’s biggest car manufacturer fell to €2.8 billion from €4.6 billion in the same period last year, significantly missing market expectations of around €4 billion.
These included a €600 million provision for potential fines related to the European Union’s carbon dioxide emissions targets and €200 million to restructure Cariad, the software unit earmarked for 1,600 job cuts by the end of the year.
The group, which owns Porsche, Audi and Skoda as well as its core brand, said a valuation adjustment of vehicles that were in transit to the US before President Trump announced 25 per cent tariffs on automotive imports also weighed on the results. The company has no manufacturing base in the US for its Audi and Porsche brands, while the majority of its VW-brand car sales are models manufactured in Mexico.
VW’s Puebla car factory is the largest in Mexico and one of the European car manufacturer’s biggest facilities, making almost 350,000 cars in 2023 all intended for export to the US.
The fall in earnings came despite a slight increase in total revenue for the first quarter, which rose by 3 per cent to €78 billion from €75.5 billion in 2024. Volkswagen sold just over one million vehicles in North America last year, 12 per cent of its sales by volume.
The company confirmed its full-year outlook of up to 5 per cent sales growth but said that this forecast excluded the possible impact of tariffs since “the effects and their interactions cannot be conclusively assessed at present”.
VW’s struggles can be traced back to a slump in its Chinese business, in particular. Last year the number of vehicles delivered by Volkswagen in China fell to its lowest point in more than a decade, although the Chinese market for cars grew overall.
Chinese competitors have started to outflank Volkswagen’s brands with cheaper electric models. BYD overtook VW as the leading manufacturer in China in 2023.
Volkswagen’s shares were up as much as 9.6 per cent on Thursday in Frankfurt amid a broader relief rally in response to Trump’s retreat on immediate tariffs.
