Volkswagen Earnings Plunge 40% as US Tariffs Cloud Outlook

Volkswagen AG’s earnings dropped by 40% in the first quarter as higher manufacturing costs cut into margins and US tariffs clouded the German carmaker’s outlook.

Earnings before tax came in at €3.1 billion in the three months through March, down from €5.1 billion a year earlier, the company said Wednesday. Group operating margin fell to 3.7% from 6%.

Volkswagen has seen profitability drop as it confronts rising costs and excess capacity at European factories, as well as weaker demand in China, a key market. Meanwhile, purchases of electric vehicles in Europe and the US have been uneven, and President Donald Trump’s tariffs are threatening to hurt profits further.

While Volkswagen left its outlook for 2025 unchanged, it said its forecast of up to 5% sales growth didn’t factor in the impact of US tariffs. The company, however, said it now expects an operating return on sales at the lower end of its 5.5% to 6.5% targeted range.

European carmakers have struggled to assess the full impact of US tariffs as the Trump administration continues to change its position with caveats, exemptions and delays. Most recently, Trump signed an directives on Tuesday to lift some duties on foreign parts and prevent multiple levies from stacking on top of each other. The move could reduce the total tariffs imposed on VW models made in Chattanooga, Tennessee, and Puebla, Mexico, and on Audi and Porsche vehicles shipped in from Europe.

Porsche AG, Volkswagen’s luxury sports-car brand, cut its profit outlook this week, citing the impact of tariffs and weaker-than-expected sales of EVs. But uncertainty around the tariffs has led other carmakers, including Mercedes-Benz Group, Volvo Car and General Motors, to scrap their forecasts outright.

Volkswagen had pre-released its quarterly earnings earlier this month, noting that operating profit had been hit by about €1.1 billion in special items. Some €300 million of the charges were attributed to diesel issues and US tariff impact on cars shipped in March.

The German company on Wednesday said European demand for its new models has been strong, with its order backlog rising to nearly 1 million units in the first quarter.

This article was generated from an automated news agency feed without modifications to text.