Volkswagen AG is overhauling its business strategy, cutting its sales forecast, and confronting up to 100,000 job cuts as profits plunge by 9.5% in the second quarter. The sweeping restructuring comes amid a severe sales slump in China, rising tariff costs, and intense competition from domestic electric vehicle makers.
Profit Slump and Revised 2026 Sales Forecast
Europe’s largest carmaker reported an operating profit of 3.5 billion euros ($3.98 billion) for the April-to-June period, marking a nearly 10% drop from a year ago and missing expectations, according to an LSEG-compiled consensus. Net profit for the three months to the end of June fell to 1.54 billion euros ($1.75 billion), representing a 32.9% drop on the same period last year digitaljournal.com. Last year’s figure was itself down nearly 37% on 2024 results digitaljournal.com.
The weaker-than-expected financial performance forced management to abandon prior expectations. Volkswagen now expects sales revenue to fall by up to 3% this year, a reversal of a previous forecast projecting a 3% increase on last year’s €321.9bn (£275.3bn) (The Guardian). Despite the revenue downgrade, the company maintained its forecast for an operating margin in the range of 4.0% to 5.5% (WHBL), an improvement over last year’s 2.8% margin (WHBL).
The China Market Slump and Delivery Losses
Much of the downward pressure stems from a steep deterioration in China, Volkswagen’s largest market. Global vehicle deliveries fell 8.6% in the second quarter to 2.077 million vehicles (Reuters), marking the steepest quarterly decline in four years (Reuters).
“The situation in China remains challenging, where we were unable to escape a significant total market decline of around 20 percent.”
Marco Schubert, a member of Volkswagen’s extended executive committee for sales
Deliveries inside China tumbled 36.6% during the quarter (Reuters), extending a multi-year trend where sales fell more than 31% in the first half of the year (The Guardian). Analysts note that traditional legacy carmakers face severe hurdles shifting to battery-electric vehicles in a market dominated by aggressive local competitors like BYD, Geely, and Chery.
Restructuring Plans and Potential 100,000 Job Cuts
To combat the profit slump, Chief Executive Oliver Blume is pushing forward with a brutal restructuring framework. The manufacturer confirmed it is raising its job cuts target to 100,000 positions (The Guardian), which is double the number previously agreed upon with labor unions (The Guardian). The proposed cuts would mostly target administrative roles across the global business (The Guardian) and include reducing the group’s model lineup by up to half (The Guardian).
Earlier this month, Volkswagen’s supervisory board rejected Blume’s initial proposals to close four factories in Germany (The Guardian). Those contested facilities include plants in Hanover, Zwickau, Emden, and the Audi facility in Neckarsulm (CNBC).
Executive Response to Margin Pressures
Volkswagen Chief Financial Officer Arno Antlitz pointed to heavy tariff burdens, premium market growth in China, and surging exports from Beijing into Europe as key margin suppressors (CNBC).
“This leads to this weight on our margin, a margin of roughly 4% is clearly a wake-up call that we have to do a second step of restructuring.”
Arno Antlitz, Chief Financial Officer at Volkswagen
Meanwhile, the company also absorbed a 500-million-euro charge during the quarter digitaljournal.com after ending production of the electric ID.4 sports utility vehicle at its Tennessee plant (CNBC) amid a difficult regulatory environment for electric vehicles in the United States.
Labour Confrontations and Next Steps
As management navigates opposition from employee representatives, discussions remain politically and operationally fraught.
The restructuring plan from CEO Oliver Blume was blocked by labor representatives on July 9.
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