Volkswagen profits plunge 37% amid tariff concerns

In the first quarter of 2025, Volkswagen, Europe's largest car manufacturer, reported an operating profit of 2.9 billion euros, which represented a decline of 37% compared to the same period in 2024. This significant decrease has raised concerns about the company's financial performance amidst a shifting global economy. The firm stated its sales revenue for the quarter reached 77.6 billion euros, marking a modest increase of 2.8% year-on-year, supported largely by vehicle sales outside of China. Volkswagen emphasized that the rise in revenue was largely driven by a notable increase in order intakes, particularly in Western Europe, which surged by 29% compared to the previous year. However, net cash flow was negative at -0.8 billion euros, reflecting ongoing challenges in the market. The company has noted the unpredictable nature of the current global economic climate, indicating that its operating return on sales, net cash flow, and net liquidity are likely to sit at the lower end of their annual forecasts. This warning is attributed to increasing political uncertainties, growing trade restrictions, and stringent emissions regulations that are all negatively impacting the automotive sector’s outlook. Notably, the company’s performance and future guidance are further complicated by the looming specter of U.S. President Donald Trump's auto tariffs, which add to the vulnerability of the automotive industry due to the globalized nature of supply chains. Although there was some positive news that tariffs on imported vehicles were partially alleviated by recent executive orders, challenges still remain with existing levies affecting vehicle parts. These developments highlight the need for Volkswagen to enhance its competitive cost structure and adapt to the ever-evolving market conditions to maintain its standing in the global automotive landscape.