Volkswagen Faces Historic Crisis Amid Weak Profits and Fierce Global Competition
By Christoph Steitz and Alessandro Parodi
Volkswagen's Struggles in a Changing Global Auto Market
FRANKFURT, June 30 (Reuters) - Volkswagen boss Oliver Blume is planning an historic overhaul of the carmaker to adapt to structural shifts in the global auto market, where rising Chinese rivals, tariffs and weak demand in Europe have upended its business model.
The crisis has intensified scrutiny of Europe's biggest automaker, which has long grappled with a complex structure, weak share performance and resistance to painful cost cuts from some stakeholders.
Paralysed Conglomerate: Governance and Structure Challenges
Volkswagen's governance, structure and ownership set-up are unique in the auto industry, combining powerful unions with the billionaire Porsche and Piech families, which control most of the company's voting rights but not most of its equity.
Complex Corporate Structure
With a web of divisions, joint ventures and other investments, the 89-year-old group, which employs more than 657,000 people, still resembles a traditional conglomerate — a set-up some investors say weighs on its valuation.
Big Trouble in China: Declining Profits and Market Share
Nowhere are Volkswagen's challenges more visible than in China, the world's largest auto market and for years a major profit driver for the company and its German peers.
Profit Decline and Shifting Focus
Those days are gone, however. Profits in China have plunged more than 80% over the past decade, placing greater focus on Europe, where demand is expected to remain below pre-COVID levels, as well as the United States, where tariffs are costing the company billions of euros.
Rising Competition from Domestic Rivals
Competition has also intensified. Volkswagen was long China's biggest automaker but has slipped to third place as technologically advanced domestic rivals have gained market share with competitive pricing.
Porsche's Struggles
Porsche, which Volkswagen listed in a landmark IPO four years ago, has been among the hardest hit. Its margins collapsed to 1.1% last year from 18% in the year of the listing.
Profits Under Pressure: Financial Performance and Market Position
Volkswagen's group profit margins more than halved between 2021 and 2025, reflecting fiercer competition, higher labour and energy costs, weak European demand and growing trade barriers.
Comparative Weakness Among Mass-Market Manufacturers
The pressures have left the company, still the world's second-largest automaker by number of vehicles sold after Japan's Toyota, among the weakest-performing mass-market manufacturers.
Rock Bottom: Share Price and Corporate Crises
The upheaval in the auto industry has also battered Volkswagen's shares, which are trading at their lowest level since July 2010.
Comparison to Dieselgate Scandal
The stock is now below levels seen a decade ago during the Dieselgate scandal, widely considered the group's biggest corporate crisis in history.
(Reporting by Christoph Steitz and Alessandro Parodi. Editing by Mark Potter)
