Volkswagen just confirmed what many in the industry suspected it’s been hit hard by the U.S. trade war. The company took a €1.3 billion ($1.5 billion) punch in the first half of 2025, forcing it to revise down both its sales and profit targets for the year.
Instead of growing, VW now expects this year’s sales to stay flat. More critically, its full-year operating profit margin has been cut to a range of 4% to 5% a significant drop from the earlier estimate of 5.5% to 6.5%.
This isn’t just about tariffs. The carmaker is also juggling a growing list of challenges: tougher competition from China, EU regulations pushing for faster EV adoption, and the ongoing cost of a massive restructuring effort.
Q2 Profit Takes a Nosedive
Volkswagen’s profit for the second quarter fell 29% year-on-year, landing at €3.8 billion. The reasons? A mix of higher sales of lower-margin electric vehicles, restructuring costs, and, of course, those painful tariffs.
Deliveries did grow globally by 1.5% in the first half of the year—but not in the U.S., where shipments dropped by nearly 10%. That’s a big deal because North America now contributes almost a fifth of the company’s total revenue.
Porsche and Audi Take the Biggest Hits
The company’s luxury arms, Porsche and Audi, took the brunt of the damage. Both brands rely heavily on exports and don’t yet have U.S. manufacturing, leaving them exposed to the full force of import tariffs.
Porsche’s quarterly profit nosedived by over 90%, down to just €154 million. Audi wasn’t far behind, with a 64% drop to €550 million. CEO Oliver Blume admitted the numbers were rough but said the worst should be behind them. “We’re expecting to bottom out this year, with signs of recovery kicking in from 2026,” he told investors.
Cutting Costs, Fast
Blume also didn’t sugarcoat what’s next: deeper cost cuts and faster execution. “We need to shift our cost efforts into high gear. We can’t afford to think of this tariff issue as a short-term glitch,” he said.
Volkswagen is already in the middle of a major overhaul, aiming to cut more than 35,000 jobs by 2030 as it shifts focus to electric vehicles and leaner operations.
Trade Talks Still Up in the Air
The big question now is whether a deal can be struck between the EU and the U.S. to ease the 25% tariffs on European cars. A recent Japan-U.S. deal, which capped tariffs at 15%, has raised hopes. If a similar agreement happens, Volkswagen says it could land in the middle of its profit guidance range.
But time is running out. “We’re already into the second half of the year,” said CFO Arno Antlitz. “The longer this drags on, the more likely we hit the lower end of our forecast.”
When asked about raising prices to cope with tariffs, Antlitz stayed tight-lipped.
The Bigger Picture
The European auto market isn’t in great shape either. June data showed a general slowdown, and Volkswagen isn’t immune. With rising pressure from Chinese brands and a race to electrify, VW’s transformation is proving as expensive as it is necessary.
For now, the company’s focused on weathering the storm. Sales might be flat. Margins are squeezed. But VW’s betting that the pain of 2025 will lay the groundwork for a leaner, sharper comeback—especially once the dust settles on the trade front.
