Volkswagen Slashes Profit Outlook as China Slump and Porsche Writedown Bite

Volkswagen has slashed its profit forecast for 2026 due to declining performance in China, restructuring expenses, and a substantial write-down at Porsche, its premium sports-car brand. The German automaker now anticipates an operating margin of just 1% this year, a steep drop from the previous forecast of at least 4%. Volkswagen shares plummeted over 7% in response, causing other automakers to follow suit.

The company expects to incur approximately €10 billion ($11.5 billion) in charges this year, encompassing restructuring costs from workforce reductions and writedowns on Chinese assets. This includes a €6 billion writedown related to Porsche, indicating revised long-term expectations for the sports-car maker. Excluding these exceptional costs, Volkswagen projected an operating margin of around 4%.

China poses a significant challenge for Volkswagen. The firm's CFO, Arno Antlitz, revealed that the market has contracted by about 20%, with no signs of stabilization. Meanwhile, Chinese automakers are simultaneously capturing domestic market share and expanding into Europe with competitively priced electric vehicles. The swifter-than-anticipated shift towards electric vehicles in Europe is adding to Volkswagen's woes.

The automaker is grappling with the rapid growth of electric vehicle sales, which are eroding profitability in its passenger-car and Audi divisions. Battery-powered vehicles typically generate lower margins compared to their combustion-engine counterparts. This difficult outlook has hastened Volkswagen's cost-cutting measures. Recently, the company reached an agreement with labor representatives that could result in an additional 100,000 job cuts globally, as management seeks to tackle excess manufacturing capacity in Germany.

Volkswagen's predicament is particularly acute because two key supports for its European operations—strong Chinese earnings and premium-brand profits—are weakening at the same time.