Crisis-wracked Volkswagen warns of €10bil hit to profits

German auto giant Volkswagen warned Friday of a 10-billion-euro hit to its annual earnings, citing tough conditions in China, problems at subsidiary Porsche and restructuring costs.

Europe’s biggest carmaker, in the process of pushing through the global auto industry’s largest job-cutting drive, said it expected a profit margin of just 1% for 2026, down from a previous forecast of between four and 5.5%.

Like its peers, Volkswagen has struggled with the costs of transitioning to electric vehicles as well as falling demand and cut-throat competition in China, the world’s largest car market.

The Volkswagen and Audi marques were particularly feeling the heat in China, the 10-brand group said Friday.

“The situation on global markets has continued to worsen — particularly in China”, VW finance boss Arno Antlitz said in an interview on the company intranet.

“Demand for battery-electric vehicles has accelerated, partly against the backdrop of the geopolitical situation and a sharp rise in petrol prices, and we currently earn significantly less from these than from internal combustion engine cars,” he added.

Volkswagen also said it had written down the value of Porsche by €6 billion, citing more modest expectations of the sports-car maker’s future performance.

Cratering sales

Porsche sales have cratered in China and it has struggled to shift its electric models, which lack the noisy thrill of petrol engines, leading to costly strategy changes.

The Porsche write-down is Volkswagen’s second in a year. It booked a 5.1-billion-euro hit last September after the luxury carmaker rejigged its product portfolio, shifting away from EVs, and cut profit targets.

On Friday VW booked another two billion euros in charges, linked to write-downs of VW assets in China, the sale of a plant in northern Germany and the expansion of early retirement schemes, the company said.

VW said earlier this month it would offload its Osnabrueck plant, in northwest Germany to Israeli investors and the German state of Lower Saxony, a major VW shareholder, with an initial air-defence project planned for the Israeli firm Rafael Advanced Defence Systems.

The carmaker also narrowed its sales outlook for the year, saying it expected a slight fall to about €315 billion. It had previously forecast sales to be flat or fall by up to three percent.

VW shares plunged 7.55% after the announcement. Fellow German carmakers Mercedes-Benz and BMW both fell over 5%.

Volkswagen earlier this month struck a deal with unions to axe up to 100,000 jobs by 2030, increasing by 50,000 the number of expected cuts across the group.

Unions have organised nationwide protests Monday outside car manufacturers and their suppliers, demanding more action to help the ailing industry.

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