October 30, 2025
FRANKFURT — Volkswagen AG, Europe’s largest automaker, plunged into its first quarterly loss in five years, reporting a €1.07 billion ($1.24 billion) net deficit for the third quarter ended September 30. The red ink marks a stark reversal from the €4.2 billion profit recorded in the same period last year and represents the company’s first quarterly loss since the height of the COVID-19 pandemic in Q2 2020, when global lockdowns crippled vehicle production and sales.
Despite the bottom-line hemorrhage, Volkswagen’s revenue edged up 2.3 percent year-over-year to €80.3 billion, buoyed by a 1.8 percent increase in global vehicle deliveries to 2.31 million units. The modest top-line growth was driven primarily by stronger demand in Western Europe and North America, where sales rose 4.2 percent and 3.1 percent, respectively. However, these gains were insufficient to offset a cascade of headwinds that eroded profitability across the group’s sprawling portfolio of 12 brands.
Chief Financial Officer Arno Antlitz described the results as “much weaker than anticipated,” pinpointing three primary culprits: escalating U.S. trade tariffs, strategic missteps at luxury subsidiary Porsche SE, and €7.5 billion in non-cash impairment charges tied to the sports-car maker. “The U.S. tariffs alone are costing us approximately €5 billion annually in lost margins and higher costs,” Antlitz told analysts during a conference call. He added that the charges reflected a revised valuation of Volkswagen’s 75 percent stake in Porsche, whose market value has slid amid faltering electric-vehicle (EV) demand.
The tariff burden stems from a new EU-U.S. trade pact finalized in July, which slashed duties on finished vehicles from 27.5 percent to 15 percent but left them well above the 2.5 percent rate in effect before former President Donald Trump’s 2018 trade war. Although the agreement averted a complete breakdown in transatlantic automotive commerce, it still imposes significant penalties on Volkswagen’s export-heavy business model. The company ships roughly 600,000 vehicles annually to the United States from plants in Germany and Mexico, including popular SUVs such as the Tiguan and Atlas.
Compounding the tariff pain, separate duties on imported auto parts—ranging from 10 to 25 percent depending on origin—continue to inflate production costs at Volkswagen’s Chattanooga, Tennessee, assembly plant, the group’s only U.S. manufacturing footprint for passenger cars. “Even locally assembled vehicles rely on thousands of components sourced globally,” Antlitz noted. “Tariffs on steel, aluminum, and electronics add up quickly.”
In response, Volkswagen is accelerating plans to localize more production stateside. Antlitz confirmed that the company is evaluating a dedicated Audi assembly facility in the U.S., potentially in the Southeast, with a final investment decision expected before year-end. “Building premium vehicles domestically would shield us from import duties and strengthen our competitive position against BMW and Mercedes-Benz, both of which already produce extensively in the U.S.,” he said. The company is also contemplating selective price increases on U.S.-bound models—potentially 3 to 5 percent—to recoup tariff-related losses without alienating price-sensitive buyers.
China, Volkswagen’s single largest market, contributed further to the malaise. Deliveries in the region fell 8.4 percent to 712,000 vehicles as domestic champions BYD, Geely, and Nio captured share with aggressively priced EVs and plug-in hybrids. Volkswagen’s joint ventures with FAW and SAIC generated €1.9 billion in operating profit, down 28 percent from the prior year, reflecting intense price competition and a slower-than-expected ramp-up of the ID. series electric models. The company’s China market share slipped to 14.1 percent from 15.6 percent a year earlier, according to data from the China Passenger Car Association.
At Porsche, once the profit engine of the Volkswagen Group with operating margins routinely exceeding 18 percent, the picture is particularly grim. The Stuttgart-based marque posted a €1.1 billion operating loss for the quarter after demand for its all-electric Taycan plummeted 42 percent amid range anxiety, charging infrastructure gaps, and a backlash from purists loyal to internal combustion engines. Porsche was forced to abandon its target of 80 percent electric sales by 2030, pushing the goalpost to “beyond 2035” and recommitting to gasoline-powered 911, Cayman, and Boxster models. The about-face triggered the €7.5 billion write-down at the parent level and prompted Porsche to cut 1,900 jobs at its Zuffenhausen headquarters.
The semiconductor crisis, thought to be largely resolved, has resurfaced with a vengeance. In August, Dutch authorities nationalized Nexperia, a key supplier of power-management chips owned by China’s Wingtech Technology, citing national security concerns. Beijing retaliated with an export ban on Nexperia’s products, severing a supply line that accounted for roughly 7 percent of Europe’s automotive chip imports. The European Automobile Manufacturers Association (ACEA) warned last week that inventories across the continent could be exhausted within six weeks, threatening widespread production halts.
Volkswagen, which consumes more than 1.2 billion chips annually, has secured supplies only through the first week of November. “We are managing production on a day-by-day, week-by-week basis,” Antlitz acknowledged. “Temporary line stoppages cannot be ruled out, particularly at our high-volume plants in Wolfsburg and Puebla.” The company has already idled its Emden factory for three days in September due to component shortages.
The quarterly loss caps a tumultuous year for Germany’s auto sector, which employs nearly 800,000 workers and accounts for 5 percent of national GDP. Rival BMW reported a 12 percent drop in third-quarter operating profit, while Mercedes-Benz issued a profit warning citing “substantially higher” material costs. Industry-wide, European vehicle registrations fell 3.1 percent through September, per ACEA data, as high interest rates and economic uncertainty dampened consumer spending.
Volkswagen’s supervisory board is scheduled to meet November 14 to review a €10 billion cost-cutting program proposed by CEO Oliver Blume. Measures under consideration include closing two German assembly plants, eliminating 15,000 administrative positions, and freezing wages for unionized workers through 2028. Labor representatives, led by works council chief Daniela Cavallo, have vowed “massive resistance” to any factory closures, setting the stage for contentious negotiations under Germany’s co-determination laws.
Shares of Volkswagen preferred stock closed down 4.7 percent at €92.40 in Frankfurt trading following the earnings release, valuing the company at approximately €48 billion. Analysts at Deutsche Bank downgraded the stock to “Hold,” citing “prolonged margin pressure and execution risks in the U.S. and China.” JPMorgan, meanwhile, maintained its “Overweight” rating, arguing that localization investments and a recovering semiconductor supply chain could restore profitability by mid-2026.
For now, Volkswagen is projecting a full-year operating margin of 5.5 to 6.5 percent, down from an earlier guidance of 6.5 to 7 percent and well below the 7.8 percent achieved in 2023. Free cash flow is expected to turn negative in the second half due to higher capital expenditures on U.S. localization and battery-cell factories in Spain and Canada.
As the sun set over Volkswagen’s sprawling Wolfsburg headquarters—where the iconic curved factory roofs have churned out Beetles, Golfs, and Passats for eight decades—executives huddled late into the evening, poring over spreadsheets and contingency plans. The road ahead is fraught with geopolitical minefields, technological upheaval, and financial strain. Yet in the words of Antlitz, “Volkswagen has weathered storms before. We will adapt, localize, and electrify—on our own terms.”
