Decrease in Volkswagen's profits seen in Q2 of 2025
Volkswagen Group, one of the world's largest automakers, has reported a decline in profit for the second quarter of 2025, despite an increase in vehicle deliveries. The decline was primarily due to the cost impact of U.S. import tariffs, restructuring expenses, and the transition towards lower-margin electric vehicles (EVs).
According to the company's financial report, earnings after tax fell 36.3% to €2.29 billion, and operating profit dropped 29.4% to €3.83 billion compared to the previous year. The decrease in profit is attributed to high burdens from increased US import tariffs, provisions for restructuring at Audi, VW Passenger Cars, and Cariad, as well as expenses related to CO2 regulation.
U.S. tariffs cost Volkswagen approximately €1.3 billion in the first half of 2025, significantly squeezing margins. The company assumes that the import tariffs for new cars into the USA will remain at the lower end of expectations at 27.5 percent.
Restructuring costs added another €700 million in expenses as the company adapts its operations amid industry shifts. Volkswagen must resolutely implement ongoing programs to improve results and accelerate where necessary.
The transition to EVs is another factor contributing to the profit decline. While EV sales are growing, these models have slimmer profit margins, increasing investment costs in battery tech and supply chain, lowering overall earnings. The order intake for fully electric vehicles has increased particularly strongly by 62 percent.
Despite these challenges, Volkswagen's order intake in Western Europe shows a clear increase compared to the previous year. The company's order books are well-filled and the company expects the positive trend to continue in the second half of 2025.
The growth is driven by new models of all drive types, including electric vehicles like VW ID.7 Tourer, ŠKODA Enyaq, and Audi Q6 e-tron. Volkswagen has noticeably improved design, technologies, and quality, and has made significant progress in software.
Volkswagen has revised its FY 2025 outlook downward, now forecasting sales revenue to be roughly flat compared to last year (previously expected up to 5% growth). The company expects a lower operating return on sales of 4.0–5.0%, down from its earlier forecast of 5.5–6.5%. Challenges such as tariff-induced costs and restructuring are expected to continue impacting profitability in the near term.
However, Volkswagen’s growing EV momentum in Europe and stable sales in other key markets signal potential for future growth as the company’s electrification strategy advances. The results highlight a tension between short-term financial pressures and long-term commitments to EV investment, with higher upfront costs expected to pay off over time as EV adoption expands.
In summary, Volkswagen’s Q2 2025 profit decline reflects a complex interplay of external trade policy impacts, internal restructuring efforts, and strategic shifts towards electrification. While financial performance is pressured in the short term, the company remains focused on navigating the EV transition and stabilizing its margins going forward.
CFO Arno Antlitz explains that the company is on the right track, but emphasizes the importance of actual cash flow. Despite the challenges, Volkswagen remains optimistic about its performance in a challenging environment, with CEO Oliver Blume expressing continued confidence in the company's future.
[1] Volkswagen Group, (2025). Volkswagen Group Q2 2025 Results. Retrieved from https://www.volkswagenag.com/en/investor-relations/financial-reports/q2-2025-results.html
[2] Reuters, (2025). Volkswagen lowers 2025 profit outlook as U.S. tariffs bite. Retrieved from https://www.reuters.com/business/autos-transportation/volkswagen-lowers-2025-profit-outlook-us-tariffs-bite-2025-08-04/
[3] Financial Times, (2025). Volkswagen’s Q2 profits hit by US tariffs and EV shift. Retrieved from https://www.ft.com/content/767c01e2-b394-4f3a-875d-4769a5f96f0a
[4] Automotive News Europe, (2025). Volkswagen's Q2 profits hit by US tariffs, restructuring costs. Retrieved from https://europe.autonews.com/automakers/volkswagens-q2-profits-hit-us-tariffs-restructuring-costs
Financing in the second quarter of 2025 was a struggle for Volkswagen Group, primarily due to high costs from U.S. import tariffs and restructuring expenses. The automotive industry's shift towards electric vehicles (EVs) also contributed to the decline, as these models have lower profit margins compared to traditional vehicles.
In the face of these challenges, Volkswagen Group's transportation sector is hoping to find growth in the European market, particularly in the order intake of EVs like VW ID.7 Tourer, ŠKODA Enyaq, and Audi Q6 e-tron. The company remains optimistic about its performance in a difficult environment and is focusing on navigating the EV transition and stabilizing its margins going forward.
