Volkswagen Profits Plummet Due to Porsche Reorganization
Volkswagen (VW) Group has reported a significant decline in net profits for 2025. The company observed a 44% drop, bringing profits down to €6.9 billion (approximately $8 billion), compared to €12.4 billion in 2024. This marks the worst annual performance since 2016, coinciding with the aftermath of the “Dieselgate” scandal.
VW’s Challenges and Future Outlook
Chief Financial Officer Arno Antlitz attributed the downturn to geopolitical tensions, tariffs, and fierce competition. The company is facing reduced demand and increased local competition in China, its largest market. Additionally, new tariffs imposed by the United States, another key export market, have complicated its operations.
The VW Group is embarking on a plan to cut 50,000 jobs across all brands by 2030 to streamline operations. The automotive giant also continues to navigate the transition toward electric vehicles, with varying targets dependent on regional demands.
Porsche’s Impact on Profits
A considerable portion of VW’s profit decline is linked to its performance brand and long-term partner, Porsche. The Stuttgart-based company reported a stark drop in net profit to just €90 million, down from €5.3 billion a year prior. The challenges affecting Porsche include a changing market landscape in China, tariffs from the U.S., and the slow adoption of electric mobility.
Porsche’s extension of production for combustion engine models resulted in a financial impact of approximately €5 billion. Furthermore, U.S. tariffs contributed to estimated revenue losses of around €3 billion. The rise of high-quality Chinese-made luxury vehicles has intensified competition, challenging Porsche’s market share.
Overall Performance Metrics
- 8.98 million vehicles sold, a 0.5% decline from 2024.
- Total revenue of €322 billion, representing a drop of 0.8%.
- Operating profit marginally increased from €2.59 billion to €2.61 billion.
- Audi’s operating profit decreased from €3.9 billion to €3.4 billion.
The operating profit margin fell by 3.1 percentage points to 2.8%. Despite these challenges, VW anticipates recovery in 2026, aided by the introduction of the next generation Golf IX, which is exclusively an electric model produced in Germany.
Job Cuts and Executive Pay Adjustments
CEO Oliver Blume reaffirmed the job reduction plan agreed upon with trade unions, detailing that approximately 35,000 positions will be cut at VW alone, with Audi and Porsche additionally planning to reduce their workforce. The cuts will primarily occur through voluntary severance or part-time arrangements, aiming to minimize outright layoffs.
In light of the company’s poor performance, CEO Blume also saw a decrease in his compensation for the year, receiving a total of €7.4 million, which reflects a drop of around €3 million. Conversely, his predecessor, Herbert Diess, remained the highest-paid executive, earning €9 million as he concluded his tenure.
Market Reaction
Following the release of the financial results, shares for both VW and Porsche increased slightly, with VW shares rising by 2.5%. Interestingly, despite the losses in 2025, both companies’ stock prices have significantly declined over the past five years, with current values lower than a year ago by approximately €20.
As VW navigates these turbulent waters, the focus will remain on mitigating losses while adapting to the fast-evolving automotive landscape.
