Surprised VW Chief Blume Faces Profit Decline Exceeding Expectations
Volkswagen, one of the world's largest automakers, is currently grappling with the impact of U.S. tariffs on cars, as the company's planned strategy to navigate these challenges comes to light.
The 27.5% U.S. tariff on cars has led Volkswagen to intensify cost-cutting efforts, freeze shipments of imported vehicles, and push for a reduction in punitive tariffs through European trade negotiators. This strategy comes in response to the significant financial impact the tariffs have had on the company. In the first half of 2025, Volkswagen experienced a €1.3 billion ($1.5 billion) hit from tariffs, resulting in a nearly 10% drop in U.S. deliveries, a 33% decline in operating profit, and a cut in its full-year sales and profit margin forecasts.
CEO Oliver Blume has emphasized the need for aggressive internal cost discipline and the accelerated implementation of efficiency measures to offset tariff-related costs. The company is also holding imported Audi vehicles at U.S. ports and freezing shipments until further clarity on tariffs, to evaluate and manage inventory amid the tariffs.
Volkswagen is also shifting its product mix towards electric vehicles (EVs), where it holds strong market momentum, particularly in Europe. Despite lower margins on some EV models, the company aims for continued growth in this sector.
Financially, the tariffs contributed to operating margins dropping from 6.3% to 4.2% in H1 2025, with operating profit falling 33% compared to the prior year. The company’s 2025 operating return on sales guidance now hinges partly on tariff relief, with margins potentially near the lower 5.5%-6.5% range if tariffs persist.
Despite these challenges, Volkswagen remains optimistic about a possible deal between the EU and the USA and plans to take an offensive role in this context. The company's boss, Oliver Blume, has offered a surprising interpretation of the business figures, stating that the world has been turned upside down due to geopolitical crises, wars, and tariffs. However, Blume claims that Volkswagen is successfully steering against these issues.
The result of the long-term test for the VW ID.3, one of the company's key electric vehicles, is not specified in the text. The specific plans of Volkswagen in relation to a potential deal between the EU and the USA are also not detailed.
The poor performance of Audi and Porsche, as well as tariffs in the USA, are cited as reasons for the decrease in Volkswagen's profit. Since April, a 27.5% tariff has been imposed on cars in the United States. Without the negative effects of tariffs, Volkswagen's second-quarter profit margin would have been around 7%. The negative effects of tariffs have contributed to a decrease in Volkswagen's profit margin, which fell from 6.5% to 4.7%. The US tariffs have cost Volkswagen a total of 1.2 billion euros.
The decline in profit is also reflected in a 16% fall in overall business in one of Volkswagen's most important markets. The media has been abuzz with coverage of Volkswagen's half-year results.
Despite these setbacks, Volkswagen's strategy appears to balance aggressive internal cost discipline, trade advocacy, supply disruptions management, and a focus on EV market growth to mitigate tariff impacts on profits and U.S. sales.
In response to the US tariffs on cars, Volkswagen has intensified its efforts in the industry, implementing cost-cutting strategies, freezing shipments of imported vehicles, and lobbying for tariff reductions through European trade negotiators. This financial strain has caused a significant drop in the company's profit, with the decline in business resulting in a 16% fall in one of Volkswagen's most important markets.
Amidst these challenges, Volkswagen's CEO, Oliver Blume, emphasizes the company's focus on internal cost discipline, the accelerated implementation of efficiency measures, and a strategy shift towards electric vehicles (EVs) to mitigate tariff impacts on profits and U.S. sales.
