Operating profit slashed in half, losing 10 billion euros a year! Volkswagen releases 2025 financial report, intensifies cost optimization

“We still have a lot of work to do.” Recently, Volkswagen Group CEO Oliver Blume stated at the 2025 full-year performance report meeting that the global situation is undergoing a comprehensive and fundamental adjustment, and the familiar certainties of the past are gradually disappearing. The reality is indeed not optimistic. After experiencing its first quarterly loss in nearly five years in Q3 last year, Volkswagen’s full-year operating profit in 2025 was halved, with ongoing performance pressures intensifying.

On March 10, local time, Volkswagen Group released its 2025 full-year earnings report. The financial report shows that in 2025, its sales revenue was €321.91 billion, a 0.8% decrease year-over-year; operating profit was €8.87 billion, down 53% from €19.1 billion in 2024; operating margin was 2.8%, slightly lower than the previous year. In terms of sales volume, the group delivered over 8.98 million new vehicles in 2025, a slight decrease of 0.55% compared to 9.03 million in 2024.

Image source: Company provided

The financial report indicates that, excluding special factors, Volkswagen’s operating profit in 2025 was €14.8 billion. After excluding restructuring costs and expenses related to Porsche product strategy adjustments (but including the impact of U.S. tariffs), the group’s operating profit margin was 4.6% (compared to 6.7% in 2024). Excluding special factors and U.S. tariffs, operating profit was €17.7 billion, corresponding to an operating margin of 5.5%.

Volkswagen Group CFO Arno Antlitz stated that product launches and restructuring measures in 2025 are crucial for enhancing Volkswagen’s resilience. However, the adjusted operating margin of 4.6% still falls short of supporting long-term growth, and Volkswagen will continue to strictly cut costs.

In response to these challenges, Volkswagen Group has been adjusting its investment pace. Blume announced in December 2025 that, as part of the group’s rolling five-year investment plan, the company plans to invest €160 billion before 2030. Compared to the previously announced expenditure plan of €165 billion for 2025-2029 and the earlier plan of €180 billion for 2024-2028, the investment scale has been scaled back.

Alongside tightening investment, cost reduction remains a core measure, including layoffs. Blume emphasized that Volkswagen pursues sustainable growth and certain profitability, making clear and responsible decisions, especially in the German market. By 2030, Volkswagen aims to cut approximately 50,000 jobs in Germany. Through collective bargaining agreements and streamlining measures, Volkswagen achieved about €1 billion in cost savings in 2025, steadily progressing toward the goal of over €6 billion in annual net cost savings by 2030.

Organizational restructuring is also underway. In January, Volkswagen Group announced that by summer 2026, it plans to reduce the number of board positions in its core brands (including Volkswagen Passenger Cars, Škoda, SEAT/CUPRA, and Volkswagen Commercial Vehicles) by about one-third.

Amidst global market pressures, China—Volkswagen Group’s largest single market—also faces significant challenges. Data shows that in 2025, Volkswagen Group delivered over 2.69 million new vehicles in China, an 8.0% decline year-over-year. Among these, more than 2.57 million were profitable fuel vehicles, accounting for over 22% of the market share. However, there is still considerable room for growth in the new energy vehicle sector. For example, despite a 32% year-over-year increase in pure electric vehicle sales within Volkswagen Group in 2025, its sales in China declined by 44.3% year-over-year.

Many analysts believe that Volkswagen’s current profitability pressure is closely related to investments in electrification transformation, rising software R&D costs, and intensified competition in the Chinese market. Morgan Stanley analysts recently pointed out that Volkswagen’s large investments in electrification and software have not yet been fully offset by short-term sales growth, exerting noticeable pressure on profit margins.

Image source: Volkswagen China official website

“Despite the challenging market environment, Volkswagen Group’s performance in China remains resilient. Last year, the group’s operating profit attributable to equity in China reached €958 million, at the upper end of the strategic guidance range. This fully demonstrates our firm commitment to the ‘In China, For China’ strategy while maintaining strict cost management to effectively respond to market pressures,” said Han Bai Chuan, CFO of Volkswagen Group (China).

In the face of multiple challenges such as price wars, speed battles, and smart technology, Volkswagen Group (China) is accelerating adjustments at both product and personnel levels. On the product side, Volkswagen plans to launch over 20 new models in China by 2026, covering pure electric, plug-in hybrid, and extended-range vehicles, all equipped with intelligent connectivity and advanced driver-assistance systems.

Ziqikai, CEO of Volkswagen Passenger Cars China, further outlined a longer-term plan: “By 2027, we will launch 21 new energy models in China; by 2029, this number will increase to 31.” He admitted that in the fierce market competition, Volkswagen’s positioning is pragmatic and reliable: “We may not be the fastest in pursuing cutting-edge technology experiences, but when it comes to providing long-term reliable and安心 products, Volkswagen has always been a trustworthy choice for consumers.”

Meanwhile, new personnel changes are also underway locally to support strategic implementation. On March 10, Volkswagen Anhui Digital Sales & Service Co., Ltd. announced internally that Li Pengcheng, a former executive at Aeva, has returned to Volkswagen as Chief Marketing Officer (CMO), aiming to further strengthen localized marketing capabilities and assist the group’s transformation and breakthrough in China.

Looking ahead to 2026, Volkswagen Group has issued a cautious performance outlook: it expects full-year sales revenue to grow by 0% to 3% year-over-year, with an operating profit margin of 4.0% to 5.5%. In the automotive business segment, the group projects an investment ratio of 11% to 12% in 2026; net cash flow from automotive operations is expected to be between €3 billion and €6 billion, with net liquidity maintained in the range of €32 billion to €34 billion.

(Edited by: Wang Zhiqiang HF013)