Volkswagen has sharply lowered its expected operating return on sales for the year as pressure intensifies across Europe, China and the U.S., with special charges expected to push its profit margin down to as much as 1%.
Volkswagen Lowers Its Profit Forecast
Volkswagen said in a press release that its previous profit forecast called for an operating return on sales between 4% and 5.5%. That outlook has now been reduced to up to 1% as the company expects roughly €10 billion (about $11.5 billion at current exchange rates) in special charges.
The charges are expected to come from areas including Porsche, China and restructuring. The revised forecast is significantly below the average analyst expectation of 4.1% and the 2.8% margin Volkswagen posted in 2025.
The company is facing pressure not only in its home region of Europe but also in other major markets, including China and the U.S., where import tariffs continue to weigh on its competitiveness. Volkswagen has also ended production of the ID.4 at its Chattanooga factory in Tennessee.
Chinese Competition Adds to Volkswagen’s Challenges
In China, Volkswagen is facing stronger competition from local automakers offering affordable vehicles with extensive features. Porsche is also dealing with declining Chinese demand for foreign luxury vehicles and setbacks in its electric-vehicle strategy.
Those challenges have contributed to a roughly €6 billion goodwill impairment tied to Porsche.
Chinese rivals are also making a stronger push into Europe, adding pressure to Volkswagen in its home market. At the same time, Europe’s faster shift toward EVs is squeezing margins because electric models generally remain less profitable than comparable gas-powered cars.
Volkswagen Plans More Job Cuts and Plant Changes
In response to the pressure, Volkswagen Group has approved a restructuring plan that calls for around 50,000 additional job cuts. The reductions would bring planned cuts to roughly 100,000 jobs globally.
The future of four German plants is also uncertain. The Emden and Zwickau plants will reportedly end production first in 2031, followed by the Hanover plant in 2032. The Hanover facility builds the U.S.-bound ID. Buzz.
By 2034, the Neckarsulm plant is expected to follow.
Volkswagen Explores a Pickup for the U.S.
In the U.S., Volkswagen is exploring opportunities in the pickup truck segment. A company statement identified potential opportunities in the “body-on-frame B-segment,” including SUVs and pickups.
Volkswagen has not confirmed any models or dimensions, leaving it unclear whether a potential pickup would compete with compact trucks such as the Ford Maverick or midsize models such as the Ford Ranger and Toyota Tacoma.
More Region-Specific Strategies
Volkswagen is also doubling down on more region-specific approaches, including its China-for-China and Europe-for-Europe strategies.
The approach could lead to more complicated operations, but Volkswagen is pursuing products tailored more closely to local buyers as the company works to reverse its current slump.
