Volkswagen warns operating margin may not exceed 1% this year, shares hit 16-year low

The world's second-largest automaker continues to face significant headwinds in capital markets after issuing a profit warning.

Removal from Euro Stoxx 50

On September 21, it was reported that Volkswagen has been removed from the Euro Stoxx 50 index—which covers the entire eurozone—for the first time in 15 years. Traders noted that this move could add further downward pressure on the German automaker's already battered share price. The company's stock has fallen more than three-quarters from its peak during the 2021 market rally and is currently trading near 16-year lows.

Notably, Stellantis—the parent company of Fiat and Peugeot and the world's fourth-largest automaker—was also removed from the Euro Stoxx 50 in September last year following a sustained share price decline.

Financial Performance Under Pressure

Volkswagen is currently facing significant operational challenges. According to its financial reports:

• 2025 full-year revenue: Approximately €321.91 billion, down 0.8% year-on-year
• Operating profit: Approximately €8.9 billion, down approximately 54% year-on-year—the lowest level since 2016
• Net profit after tax: Down approximately 44% year-on-year, from €12.4 billion in 2024 to €6.9 billion

Reasons for Profit Decline

Volkswagen Group attributed the profit decline to four main factors:

1. Impact of new U.S. import tariffs—costing the company approximately €3 billion
2. Costs related to Porsche's product strategy adjustments
3. Exchange losses from currency fluctuations
4. Compressed profit margins due to intensified global price competition and product mix adjustments

In the first half of this year, the company reported an operating profit of €5.9 billion (down 11.6% year-on-year) and a net profit after tax of €3.1 billion (down 30.7% year-on-year).

New Profit Warning and Impairments

Volkswagen issued another profit warning on September 18. The company updated its fiscal 2026 forecast, projecting a full-year operating profit margin of no more than 1%, down from the previous expectation of 4.0% to 5.5%. The company also announced approximately €10 billion in special-item impairments, of which about €6 billion relates to goodwill impairment for the Porsche brand.

Volkswagen stated that market conditions are expected to deteriorate further, particularly in China, and that accelerating demand shifts toward battery electric vehicles have led to downward revisions for the Audi and Volkswagen passenger car brands.

Porsche's Outlook and Job Cuts

Porsche disclosed that it expects its fiscal 2026 after-tax result to range between a loss of €500 million and a profit of €1.5 billion. Last year, Porsche's profit margin was just 1.1%, already at a historic low.

To reduce costs, Porsche is expanding its workforce reduction. According to relevant documents, Volkswagen Group's supervisory board recently approved an agreement for Porsche to cut approximately 4,100 jobs to close a gap of around €700 million in indirect costs. These cuts will be "stacked on top of existing agreements." In July, Porsche management and labor representatives had already agreed to cut an additional 5,000 jobs on top of an earlier plan for 4,000 reductions.

CEO Warns of "Precarious" Situation

Volkswagen Group CEO and Chairman of the Management Board Oliver Blume warned last month that the group is in a "precarious" position. He is set to hold multiple rounds of talks with employees to gain support for the company's cost-saving plans. In an interview published on the company's intranet and forwarded by media, Blume emphasized that Volkswagen and the entire German automotive industry are experiencing "the most severe upheaval in history" due to unfavorable global economic conditions and competition from China.

"2030 Future Plan" Approved

On September 3, Volkswagen Group's supervisory board formally approved a comprehensive reform plan called the "2030 Future Plan."

According to an official announcement, the board unanimously approved a full restructuring plan to improve operational efficiency and enhance competitiveness. The plan calls for an additional 50,000 job cuts, bringing the total planned reductions to 100,000. Volkswagen will streamline its business and asset portfolio while reducing its model lineup by approximately 50% by 2035, aiming to reverse the current situation of high costs and compressed profits amid intensifying global competition.

As early as March, Volkswagen had announced plans to cut 50,000 jobs in Germany by 2030, covering multiple business units including Volkswagen Passenger Cars, Audi, Porsche, and software subsidiary CARIAD. The newly approved additional 50,000 cuts expand the scope of optimization to include some management positions, back-office administration, and support departments.

Production Capacity Concerns

On the production side, four German plants—Hannover, Emden, Zwickau, and the Audi-owned plant in Neckarsulm—are operating below capacity and remain on a risk watch list, with uncertain future prospects. In December 2025, Volkswagen already closed its "Transparent Factory" in Dresden, Germany.

Management has not made a final decision to close factories but is exploring diversified alternatives. The idle plant in Osnabrück has begun discussions with defense industry companies. Management has also proposed backup plans, including exploring the possibility of producing China-market-specific models at European plants to utilize existing production lines and mitigate the employment impact of plant closures.

Sale of Osnabrück Plant

According to CCTV News, in response to the impact of U.S. tariff policies and market downturns, Volkswagen Group announced on September 7 that it would sell its plant in Osnabrück, northwestern Germany, to an investment firm based in Israel and the state government of Lower Saxony. The plant will transition from automobile manufacturing to military products.

Reports indicate that this move will secure nearly 90% of the 1,800 jobs at the Osnabrück plant. After the production line stops making cars in 2027, the "first pillar project" for the new owners will involve cooperation with an Israeli defense company, potentially including air defense weapon systems and components, with products primarily delivered to European countries.

Editor: Sun Tonghuai