Finance
Volkswagen forecasts margin recovery after tough 2025
Published by Global Banking & Finance Review®
Posted on March 10, 2026
3 min readLast updated: March 10, 2026
Quick Summary
Volkswagen’s operating margin, battered at 2.8% in 2025 due to tariffs, competition from China and rising EV costs, is projected to rebound to 4.0–5.5% in 2026. Analysts had expected 2.9% but the actual 2025 margin fell slightly short.
Volkswagen stung by tariffs, China battle as profit halves
By Rachel More
Volkswagen Faces Challenging Market Conditions in 2025
WOLFSBURG, Germany, March 10 (Reuters) - Volkswagen is in for another tough year dominated by tariffs and the battle to win back China, after Europe's largest carmaker reported a slump in operating profit on Tuesday and forecast only a modest recovery for its dwindling margin.
Like its rivals, Volkswagen has contended with pressures across major markets, with U.S. tariffs costing the company billions and local competition eroding its share in China, the world's biggest car market.
The German auto group, whose subsidiaries Porsche and Audi have also come under strain, expects an operating margin of between 4% and 5.5% in 2026, after 2.8% in 2025 and 5.9% a year earlier.
Analysts polled by Visible Alpha expect a 5.2% margin this year, at the higher end of the company's forecast range.
Impact of Tariffs and Competition
Tariffs and Global Market Pressures
FUNDAMENTALLY DIFFERENT ENVIRONMENT
"We are operating in a fundamentally different environment," CEO Oliver Blume said in a statement.
China Market Share and Local Competition
The carmaker's operating profit more than halved in 2025 to 8.9 billion euros ($10.4 billion), missing analysts' forecast of 9.4 billion euros, dragged by tariffs and a costly strategic shift at Porsche, which paused its transition to electric last year amid weak demand.
Revenue was flat at 322 billion euros, with scant hopes for growth in 2026, when the company expects revenue to develop in a range of 0% to 3%.
Again, analysts' expectations were at the higher end of the scale.
Strategic Shifts and Financial Performance
Product Launches and Restructuring
CFO Arno Antlitz said product launches and restructuring measures in 2025 were important to boost Volkswagen's resilience.
"But the operating margin of 4.6% adjusted for restructuring is not sufficient in the long run," he said, adding that Volkswagen would continue to rigorously reduce costs.
Cash Flow and Job Cuts
In January, Volkswagen reported a 2025 net cash flow of 6 billion euros, a major improvement from a forecast for no cash flow, which triggered a share rally but also drew criticism from trade unions who questioned the result as the company was engaging in sweeping job cuts.
The group plans to make around 50,000 job cuts by 2030 in Germany.
Porsche's Restructuring and Profit Decline
This includes a restructuring package at Porsche, whose operating profit disappeared almost entirely in 2025, falling by 98% to 90 million euros.
(Additional reporting by Amir Orusov and Christina Amann, editing by Friederike Heine, Thomas Seythal and Louise Heavens)
Key Takeaways
- •2025 was a challenging year as U.S. tariffs, a costly electric vehicle transition and aggressive Chinese competition crushed profit margins—operating margin fell to 2.8% vs expectations of ~2.9%.
- •Volkswagen projects a substantial margin improvement in 2026, targeting an operating margin of 4.0–5.5%.
- •The turnaround hinges on cost-saving measures, EV mix stabilization and easing trade tensions, with S&P noting modest recovery from 2025’s one‑off charges and tariff headwinds.
Frequently Asked Questions about Volkswagen forecasts margin recovery after tough 2025
1What margin does Volkswagen expect for 2026?
Volkswagen expects an operating margin of between 4.0% and 5.5% in 2026.
2What was Volkswagen's operating margin in 2025?
Volkswagen's operating margin stood at 2.8% in 2025.
3What factors impacted Volkswagen's 2025 performance?
Volkswagen faced tariffs, strong competition from China, and the cost of shifting to electric vehicles in 2025.
4How did last year's margin compare to analyst expectations?
Last year's margin came in slightly below the expected 2.9%, as polled by Visible Alpha.
