Crisis-wracked Volkswagen warns of €10 billion hit to profits

German automaker Volkswagen has warned of a €10 billion hit to its annual profits due to challenging conditions in China, issues at its Porsche subsidiary, and restructuring costs. The world's largest carmaker, embarking on the largest job cuts in the global automotive industry, now expects a profit margin of just 1% for 2026, from a previous forecast of 4-5.5%.

Volkswagen and Audi are struggling with electric vehicle costs, falling demand, and fierce competition in China, the largest car market. Volkswagen's finance chief Arno Antlitz explained to the company intranet that demand for battery-electric vehicles has increased, but earnings from them are significantly lower than from internal combustion engine cars.

Porsche's value has been reduced by €6 billion, reflecting more conservative expectations for the sports car maker's future performance. The Porsche decline is Volkswagen's second write-down in a year, following a €5.1 billion hit in September when the luxury brand revised its product portfolio and lowered profit targets. VW also recorded two billion euros in charges this Friday, including asset write-downs in China, the sale of a German plant, and expanded early retirement schemes.

The company recently announced plans to offload its Osnabrück plant in northwest Germany to Israeli investors and the German state of Lower Saxony, with an initial defense project planned for Israeli firm Rafael Advanced Defence Systems. VW has also reduced its sales outlook for the year, predicting a slight decline to around €315 billion, down from a flat or three percent decline forecast.

The stock plummeted 7.55% after the announcement. German rivals Mercedes-Benz and BMW also fell over 5%. Earlier this month, Volkswagen agreed with unions to cut up to 100,000 jobs by 2030, up by 50,000 from the previously expected cuts across the group. Unions have staged nationwide protests outside car manufacturers and their suppliers, demanding more action to support the struggling industry.