Volkswagen reported a second-quarter operating profit of €3.5 billion ($3.98 billion), missing analyst expectations by nearly €800 million and marking a 10% decline compared to last year. This disappointing result triggered a 3% drop in the company’s shares on Friday, pushing year-to-date losses close to 30% amid a sharply lowered revenue outlook for 2026.
Profit Decline and Revenue Outlook Revision
The automaker slashed its 2026 revenue forecast from a potential growth of up to 3% to a possible contraction of as much as 3%, reflecting a more cautious stance due to weakening sales, especially in China. In the first half of 2026, Volkswagen’s operating profit dropped 11.6% to €5.9 billion, with its operating margin falling to 3.8% from 4.2% a year earlier. The company reported vehicle sales of just under 4 million units, a decline of 8.4% from the previous year, largely driven by a 31.6% slump in Chinese deliveries.
Cost-Cutting and Job Reductions Underway
Volkswagen’s CFO Arno Antlitz described the current margin level as a ‘‘wake-up call’’ necessitating further restructuring. The company confirmed plans to reduce its workforce by up to 100,000 jobs, doubling earlier estimates. Four German plants including those in Hanover, Zwickau, Emden, and Audi’s Neckarsulm facility face uncertainty, with no confirmed alternative plans for continued operation. This shift puts strain on a 2024 agreement with unions that had aimed to prevent closures and compulsory layoffs until 2030. Antlitz emphasized that plant closures are not the primary goal; rather, the focus is on lowering costs and boosting productivity.
Challenges in China and Rising Tariffs
China remains a significant challenge for Volkswagen, as the overall Chinese auto market has shrunk by 20%. Domestic Chinese automakers are intensifying their exports to Europe, increasing competition for Volkswagen. also tariff pressures have forced the company to halt U.S. production of its ID.4 electric SUV as of April, citing tough conditions for EV manufacturing in America. Volkswagen’s software division, CARIAD, showed some growth, generating €815 million in revenue during the first half of the year, a €250 million increase year-over-year.
