Volkswagen's Q1 Profit Slumps 14% as Tariffs and China Bite Europe's Biggest Carmaker

Volkswagen on Thursday reported a sharper-than-expected drop in first-quarter profit, with Europe's largest automaker citing US tariffs and intensifying Chinese competition as headwinds that dragged operating earnings down by double digits.

The Wolfsburg-based group posted operating profit of €2.5bn for the three months to March, down 14.3% year on year and well short of analyst expectations of nearly €4bn. Sales revenue eased 2.5% to €75.7bn, marginally above consensus, while net profit came in at €2.0bn. Group deliveries slipped 4% to 2.05m vehicles, with US sales tumbling 20.5% on the back of tariffs and regulatory changes, and Chinese volumes collapsing almost 15% to 548,700 units.

"Wars, geopolitical tensions, trade barriers, stricter regulations, and intense competition are creating headwinds," the company said, in a downbeat tone that was met with little comfort from its 2026 guidance: an operating return on sales of just 4 to 5.5%, against 2.8% achieved last year and a long-held aspiration of 8 to 10%.

The quarterly miss adds urgency to the restructuring confirmed in March, when chief executive Oliver Blume signalled plans to cut roughly 50,000 jobs across the German operations of the VW, Audi, Porsche and Cariad units by 2030, on top of a 20% group-wide cost programme running to 2028.

Beneath the headline weakness, pockets of strength emerged: Skoda deliveries rose 14%, Volkswagen Commercial Vehicles climbed 10%, and MAN truck sales were up nearly 15%. But with Berlin pressing Brussels for a softening of EU CO2 rules and Chinese rivals such as BYD and Leapmotor ramping up European volumes, Wolfsburg's path back to historic margins looks longer and steeper than cost-cutting alone can deliver.