Volkswagen AG has revised its full-year financial guidance downward after enduring a challenging first half of 2025, with US tariffs and restructuring efforts weighing heavily on its earnings.
The German automotive giant reported Friday that €1.3 billion ($1.5 billion) in tariff-related costs and €700 million in restructuring charges at Audi, Volkswagen Passenger Cars, and software subsidiary Cariad significantly dented its operating profit for the first six months of the year.
The company had previously held off altering its initial 2025 outlook, awaiting more clarity on global trade dynamics.
However, escalating tariff pressures—particularly from the US—forced a reassessment.
Additional costs tied to tightening emissions regulations also contributed to the decline in profitability.
US tariffs take a toll
Volkswagen’s financial update comes in the wake of a 25% tariff imposed by former President Donald Trump on global automotive imports to the US, adding to the existing 2.5% levy.
While countries like the UK and Japan have since negotiated tariff reductions to 10% and 15%, respectively, the European Union has yet to secure a similar arrangement.
As of now, EU exports continue to face the full 27.5% duty, which Volkswagen cited as a major factor impacting its first-half results.
The company acknowledged “high uncertainty” regarding the trajectory of tariff negotiations, noting that both the impact of current tariffs and the possibility of reciprocal measures remain difficult to predict.
The Wall Street Journal reported that US-EU negotiations are ongoing, with a potential deal in the works that could bring EU auto tariffs down to 15%, though no agreement has been finalized.
Revised forecasts reflect a more cautious outlook
Volkswagen now expects group operating return on sales to fall between 4% and 5% for the full year—down from the previous forecast of 5.5% to 6.5%.
Projected sales growth has also been lowered, now expected to be in line with 2024 levels rather than growing by up to 5%.
Cash flow and liquidity guidance have also been reduced.
The automotive division’s net cash flow is now forecast between €1 billion and €3 billion, compared to the earlier range of €2 billion to €5 billion.
Net liquidity expectations have been revised to €31 billion to €33 billion, down from the prior forecast of €34 billion to €37 billion.
The updated guidance is conditional on whether US tariffs remain in place.
The lower end of Volkswagen’s forecasts assumes the current 27.5% tariff persists throughout the second half of 2025. The upper end assumes a reduction to 10%.
Profit falls, lower-margin EVs add pressure
Volkswagen’s second-quarter operating profit declined to €3.83 billion, down from €5.43 billion a year ago.
Revenue also slipped 3% to €80.81 billion, slightly missing analyst expectations of €82.16 billion, according to a FactSet poll.
Chief Financial Officer Arno Antlitz highlighted both the company’s operational headwinds and strategic progress.
“What really matters is cash in the bank,” he said. “That’s why we must press ahead with our ongoing programs to improve earnings and pick up the pace where necessary.”
Antlitz pointed to strong product performance and continued transformation efforts but acknowledged that increasing sales of lower-margin electric vehicles, coupled with restructuring and trade pressures, had eroded profitability.
Volkswagen anticipates further hurdles ahead, including geopolitical tensions, regulatory pressures, and heightened global competition, factors that will continue to shape its performance in the months to come.
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