Volkswagen Slashes Profit Outlook as China Slump and Porsche Writedown Bite

Volkswagen has dramatically cut its 2026 profit outlook as deteriorating business in China, restructuring costs and a multibillion-euro writedown at Porsche pile pressure on Europe’s largest automaker.

The German carmaker now expects an operating margin of no more than 1% this year, down from its previous forecast of at least 4%, according to Bloomberg. Volkswagen shares fell more than 7% following the announcement, dragging other automakers lower.

VW expects around €10 billion ($11.5 billion) in charges this year, including restructuring costs associated with workforce reductions and writedowns on Chinese assets. The total includes a €6-billion writedown related to Porsche, reflecting revised long-term expectations for the sports-car maker.

Excluding the exceptional charges, Volkswagen said its operating margin would be around 4%.

China represents one of the biggest challenges. Volkswagen CFO Arno Antlitz said the market has contracted by around 20%, with no stabilization currently in sight. Chinese automakers are simultaneously taking domestic market share and expanding into Europe with competitively priced electric vehicles.

The faster-than-expected shift toward EVs in Europe is creating another headache. Volkswagen said growing EV sales are weighing on profitability at its Volkswagen passenger-car and Audi businesses because battery-powered vehicles generally generate lower margins than comparable combustion-engine models.

The deteriorating outlook is accelerating VW’s efforts to reduce costs. The automaker recently reached an agreement with labor representatives that could increase planned job cuts to 100,000 globally, while management is also seeking to address excess manufacturing capacity in Germany.

For Volkswagen, the challenge is particularly significant because two pillars that historically supported its sprawling European operations—strong Chinese earnings and premium-brand profits—are weakening simultaneously.

This post appeared first on https://oilprice.com