Volkswagen's earnings drop by a third in the recent period
Volkswagen Group's financial performance in the first half of 2025 showed a decline, primarily due to the impact of U.S. import tariffs, restructuring costs, and CO2-related expenses, despite growing electric vehicle (EV) sales.
The Group delivered 4.4 million vehicles worldwide, a 1.3% increase year-on-year, with EV deliveries up 46.7% to 465,000 units, raising the EV share to 10.6% of total deliveries.
However, the Group's operating result dropped significantly to €6.7 billion from €10 billion in the previous year, a 33% decline. This was mainly due to higher U.S. import tariffs costing about €1.3 billion, restructuring expenses of around €700 million, and provisions related to CO2 fleet regulations in Europe and the USA. Earnings before tax fell to €6.4 billion from €10.1 billion, with net income after tax declining by €2.8 billion to €4.5 billion.
The tariffs specifically caused a $1.5 billion loss for Volkswagen in H1 2025, prompting the company to propose a $10 billion investment in the U.S. to mitigate these impacts and stabilize its North American operations. Despite the challenges, Volkswagen's sales remained stable or grew in Europe, South America, and some Central European markets, but North America and Asia-Pacific saw downward trends in deliveries.
Volkswagen also faces pressure from CO2 fleet regulatory costs, which increased expenses alongside currency exchange effects. Restructuring costs remained on par with the previous year but continue to weigh on profitability. The Automotive Division experienced negative net cash flow (€-1.4 billion), reflecting investment needs despite a solid net liquidity position of €28.4 billion.
Overall, Volkswagen trimmed its full-year outlook, lowering its expected operating return to 4%-5% from a prior 5.5%-6.5%, highlighting tariff-related challenges and the cost-heavy transition to electrification. The EV momentum is strong, especially in Europe, but the transition involves considerable investment and cost pressures amid shifting global market conditions, including market share losses in China to local competitors due to rapid electrification policies.
In summary, Volkswagen's first-half 2025 financial performance reflects a complex mix of:
- Positive: Growth in vehicle deliveries and particularly strong EV sales.
- Negative: Significant profit decline (operating profit down 29%), driven by U.S. tariffs (~€1.3 billion), restructuring (~€700 million), CO2 regulation costs, and exchange rate effects.
- Reduced full-year outlook and a need for increased U.S. investment to offset tariff-related losses.
- Continued strategic focus on electrification amid competitive and regulatory challenges in global markets.
[1] Volkswagen AG Press Release, 2025 [2] Reuters, 2025 [3] Financial Times, 2025 [4] Bloomberg, 2025 [5] Automotive News Europe, 2025
- The financial losses incurred by Volkswagen Group in the first half of 2025, predominantly due to U.S. tariffs and CO2-related expenses, have led to a proposed $10 billion investment in the U.S. automotive industry.
- Despite growth in the automotive business sector, with electric vehicle (EV) sales increasing by 46.7% and accounting for 10.6% of the Group's total vehicle deliveries, the financial performance of Volkswagen Group showed a significant decline in the first half of 2025.
- In an effort to stabilize its North American operations and offset tariff-related losses, Volkswagen is planning strategic investments in transportation infrastructure to support its business operations and electrification efforts.
