Measures in question were deemed unnecessary by the Commission.
Volkswagen Group, the leading player in electromobility in Europe with a 28% market share, has reported a 29% decline in its operating profit for the second quarter of 2020. The group's after-tax profits dropped by a third, amounting to €2.29 billion, while revenues decreased by 3% to €80.8 billion.
The decline in profits was due to several factors, including increased costs associated with US import tariffs (25-30%), lower margins from growing electric vehicle (EV) sales, and restructuring expenses totaling around €2 billion. The US tariffs, announced by President Trump, have created "high uncertainty" around trade policy for the second half of the year.
Regarding the impact on Audi and Porsche, both premium brands exhibited a weak performance, contributing to the overall profit decline. While specifics on each brand’s numbers were not detailed, the report highlighted these brands as key factors in the profit warning issued by Volkswagen Group.
In the face of these challenges, Volkswagen is taking steps to mitigate the impact. The company lowered its operating return on sales forecast for 2025 from a previous 5.5–6.5% down to 4–5%. Additionally, a global restructuring plan has been announced, which includes cutting over 35,000 jobs by the end of the decade.
The core Volkswagen brand generated more operating profit than Audi and Porsche combined in the second quarter, with an operating profit of €991 million. Despite this, Audi's operating profit in the second quarter dropped by two-thirds to €550 million. Porsche's operating profit in the car business, excluding financial services, was €154 million, a significant decrease from the previous year’s €1.7 billion.
Looking ahead, Volkswagen aims for revenue to be lower than previously forecast, with the CEO aiming for a level in line with the previous year, rather than up to 5% growth. This outlook underscores Volkswagen’s need to navigate tariff-induced costs, margin pressure from EVs, and market competition to stabilize profitability.
Sources:
- Volkswagen Group Q2 2020 Results
- Reuters: Volkswagen cuts profit outlook as US tariffs hit results
- Autocar: Volkswagen Group Q2 results: Profit warning and cost-cutting plan
The decline in Volkswagen Group's profits, which includes the finance and business sectors, is partially attributed to increased costs associated with US import tariffs, decreased margins from growing electric vehicle sales, and restructuring expenses. The US tariffs, a factor of uncertainty in trade policy for the rest of the year, have negatively impacted both Audi and Porsche, key brands that contributed to the overall profit decline.
In an attempt to mitigate the impact, Volkswagen has reduced its operating return on sales forecast for 2025 and announced a global restructuring plan that includes job cuts. The industry-wise results show that although the core Volkswagen brand had more operating profit than Audi and Porsche combined, both premium brands exhibited a weak performance, with Audi's operating profit dropping by two-thirds and Porsche's operating profit significantly decreasing compared to the previous year.
