Volkswagen: Why the stock market loves Volkswagen's profit slump

The VW Group reported a significant drop in profits in the second quarter. The Wolfsburg-based company reported earnings after taxes of €2.29 billion, a good third less than a year earlier. The reasons for this were, among other things, the poor performance of the expensive Porsche and Audi brands in day-to-day business – and tariffs in the USA.

Import duties in the USA alone cost the company €1.2 billion. A 27.5 percent tariff has been levied on cars there since April. This also caused sales there to plummet by 16 percent. VW also cited high conversion costs and the current strong performance of electric cars, which have even lower margins, as reasons. In an interview with manager magazin in mid-April , CEO Oliver Blume (57) spoke in detail about the company's restructuring . In China, the company also once again recorded significantly lower earnings.

The Group's operating result fell by a good 29 percent to €3.83 billion, corresponding to an operating margin of 4.7 percent. This was in line with analysts' expectations. Despite a slight increase in deliveries, sales were down 3 percent at €80.6 billion.

The former profit-making powerhouses Audi and Porsche performed particularly poorly. At the Ingolstadt-based company, Audi's operating profit fell by two-thirds to €550 million in the second quarter. Sports car manufacturer Porsche earned only €154 million from its automotive business – excluding financial services – compared to €1.7 billion a year earlier.

The Wolfsburg-based core brand VW, on the other hand, earned significantly more in the months of April to June: €991 million, almost six times as much as in the very weak prior-year period. This meant that the long-struggling core brand generated more operating profit than its two premium sister brands combined.

The figures were initially received poorly on the stock market. Volkswagen shares began trading significantly lower. Later, the price turned positive. Most recently, Volkswagen was listed at the top of the DAX with an increase of around 3.5 percent, followed by other automotive stocks that apparently followed suit.

One reason for the turnaround was the strong performance of the group's volume brands and progress in the restructuring. The VW and Skoda brands, for example, performed better than expected. The Core brand group around the VW brand achieved an operating return on sales of 4.8 percent, which now puts it ahead of rivals Stellantis and Renault. Skoda even achieved an operating return on sales of 8.5 percent in the first half of the year.

The brand's restructuring program is also beginning to show initial results. The group is apparently making progress, particularly in reducing its enormous workforce. At the end of June 2025, VW employed 106,200 men and women in Germany. At the end of December 2023, the number was just 115,100.

The plants in Emden and Wolfsburg are making significant progress in reducing product costs, said CFO Arno Antlitz (55). The effect isn't quite as large as planned, but it's already "really good progress." CEO Blume added: "We're fighting for every cent."

Background: The company adopted a major cost-cutting program at the end of last year and plans to eliminate over 35,000 jobs by 2030. This corresponds to approximately one in four jobs. A total of 20,000 employees have already agreed to give up their jobs, mostly through partial retirement. 4,000 positions have already been eliminated.

Nevertheless, problems continue within the group. Porsche and Audi are struggling, especially in China , and high restructuring costs are currently weighing on their profits. Audi plans to cut 7,500 jobs , and Porsche at least 1,900 . Audi is also launching new models, which is temporarily slowing sales.

Volkswagen expects lower profits this year due to US tariffs and the weakness of Porsche and Audi. The Wolfsburg-based DAX-listed company announced that operating profit as a percentage of sales is likely to fall to between 4.0 and 5.0 percent. For the first time, VW factored in the US tariffs. Previously, VW had targeted a return of 5.5 to 6.5 percent, but excluding the tariffs.

CEO Oliver Blume also expects revenue to be lower: Instead of an increase of up to 5 percent, the manager is now targeting sales at the previous year's level. Meanwhile, the sell-off at Porsche and Volkswagen has long since begun . Blume has already put several subsidiaries, including a stake in robotaxis, up for sale.

Blume, however, is pleased with the increasing sales figures for electric cars. "In Europe, we have also expanded our leading position in electromobility with a 28 percent market share," he said, according to the statement. "Our order books are well filled."

However, the growing e-car business is currently weighing on earnings, added CFO Arno Antlitz. Half-year profit fell "also due to the lower-margin e-models."