Volkswagen said on Friday its net profit fell in the second quarter as the crisis-hit carmaker, weighing up to 100,000 job cuts worldwide, faces growing competition at home and from China.
Net profit for the three months to the end of June came to 1.54 billion euros ($1.75 billion), the 10-brand group said, a 32.9 percent drop on the same period last year. Last year’s figure was itself a drop of nearly 37 percent in 2024.
The result was hit by a 500 million euro fee booked by the carmaker for halting US production of its electric ID.4, Volkswagen said, as well as “negative mix effects”, meaning the auto giant sold more lower-margin products.
The firm, which in addition to its marque also includes Lamborghini, Audi, Skoda and Porsche, also cut its guidance for the year and said it now saw sales flat or down as much as three percent. It previously expected growth of up to three percent.
The results raise pressure on the beleaguered group, which has suffered from shrinking margins from electric car sales, US tariffs and, above all, strong Chinese competition.
“We must accelerate efforts to structurally lower our cost base and sustainably improve the quality of our earnings,” said Volkswagen’s chief financial officer, Arno Antlitz. “What matters now is rapid and sustained implementation.”
– Repair –
Like other German carmakers, Volkswagen has suffered years of declining sales in China, the world’s largest market, weighed down by stiff competition from domestic rivals as well as muted demand given China’s sluggish domestic economy.
Volkswagen’s vehicle shipments in the country last year were already at their lowest level since 2011, and they fell by a further 31.6 percent in the first six months of the year, the firm said.
Pressure to cut costs has intensified as Chinese brands have sought to export their way out of fierce competition at home, threatening European carmakers on their home turf.
Brands including BYD, Geely and Chery took almost 11 percent of the European car market in May, according to automotive intelligence firm Dataforce, up from just under three percent three years ago.
Volkswagen CEO Oliver Blume told staff earlier this month that four plants could be closed and another 50,000 jobs could have to go on top of the 50,000 redundancies already agreed across the group.
If the restructuring goes ahead, it would be the largest in auto industry history, eclipsing the 50,000 job cuts General Motors made after filing for bankruptcy in 2009.
Any repair is likely to be difficult. Labor representatives and the German state of Lower Saxony, both of which take a dim view of factory closures, together hold more than half the seats on the supervisory board.
Lower Saxony is a shareholder in the Volkswagen Group and holds 20 percent of the voting rights, in addition to hosting six Volkswagen factories.
Talks in 2024 about possible factory closures resulted in a deal with unions that ruled out factory closures and mandatory layoffs until 2030 as part of a deal that would see 35,000 jobs cut at the Volkswagen brand in Germany by the end of the decade.
