Industrial Decline Is Authentic: Six Insights from VW's Interim Report Appeal
Volkswagen Group Faces Profit Decline Amidst Cost-Cutting and Restructuring
Volkswagen Group, the German automotive conglomerate, is currently navigating through a period of significant change, with cost-cutting measures and restructuring efforts impacting its profitability in 2025.
High U.S. import tariffs have been a major challenge, resulting in €1.3 billion in costs during the first half of the year. Additionally, restructuring costs amounting to €700 million have further impacted the company's financial outlook, leading to a downward revision of the operating return on sales forecast to between 4% and 5%, down from the earlier 5.5% to 6.5%.
This restructuring, aimed at adapting to tariffs and the EV transition, has led to a 29% profit drop in Q2 2025 and an even steeper 33-38% profit decline over the first half of the year. Despite increased vehicle deliveries, particularly in electric vehicles (EVs), the profitability impact is evident.
The shift towards EVs, including those from subsidiaries like Porsche, generates volume growth. Volkswagen delivered 4.4 million vehicles in H1 2025 with increases in EV orders. However, EV models generally have lower profit margins, which, combined with restructuring costs and tariffs, squeezes overall profitability.
Porsche, as part of the Volkswagen Group, is indirectly affected by these group-wide challenges. Although specific details on Porsche’s cost-cutting are less publicized, the entire group’s restructuring initiatives and tariff-related burdens shape cost management and profitability at all subsidiaries.
Volkswagen emphasizes ongoing investment in electrification and operational realignment as long-term strategic moves, but these come with immediate cost pressures reducing profitability. The full recovery in profitability depends on tariff relief, successful restructuring, and better margins on electric models going forward.
Meanwhile, other subsidiaries within the Volkswagen Group are also experiencing changes. Skoda, the Czech subsidiary, remains the most profitable among the large VW brands, achieving a margin of 8.5 percent in the first half of the year. Contrastingly, Seat, the Spanish subsidiary, is the problem child, with a margin of only 0.5 percent.
In a move to strengthen its position in China, Audi has started afresh with the four rings of the logo disappearing entirely and the word 'AUDI' appearing on the radiator grille.
The future of MAN, VW's truck subsidiary, could see a joint venture with Rheinmetall to build military vehicles in Osnabrück. Traton, another truck subsidiary, is struggling due to the weak world economy and costs for the development of electric and autonomous trucks.
Despite these challenges, Volkswagen is recording increasing pre-orders for both combustion engines and electric vehicles, indicating a positive outlook for the future. The CEO of Porsche, Ralf Brandstätter, is still defining cost-cutting efforts for the luxury car brand.
The VW agreement from December 2024 to 2035 plans to cut 35,000 jobs in Germany, reflecting the ongoing efforts to adapt and streamline operations within the group.
[1] Reuters [2] Bloomberg [3] Autocar
The restructuring initiatives across Volkswagen Group, including cost-cutting, have extended to various sectors such as finance and industry, leading to increased expenditure.
Despite these restructuring costs and tariffs, the shift towards electric vehicles, even within subsidiaries like Porsche, generates volume growth but with lower profit margins, impacting the group's overall profitability.
