Oliver Blume, CEO of Volkswagen (R) appears on as German Chancellor Friedrich Merz will get right into a VW ID Cross EV idea automotive. (Photograph by ALEXANDRA BEIER/AFP by way of Getty Photos)
AFP by way of Getty Photos
Volkswagen stated working income dived 9.5% within the second quarter whereas gross sales for 2026 would slip by 3%, reversing an earlier optimistic prediction.
However buyers reacted calmly, with the shares dropping simply over 1%. The view was disputed {that a} bit extra unhealthy information would possibly assist the corporate to steer reluctant unions to simply accept the CEO’s plan to resolve existential issues.
The corporate maintained its forecast that the working revenue margin for 2026 would vary between 4.0% and 5.5%. The margin was 4.2% within the second quarter as income slid 9.5% to €3.5 billion ($4 billion) in contrast with the identical interval final 12 months.
The shares closed at €73.0, down simply over 1%. The inventory worth is now 33% decrease than it was in the beginning of the 12 months. VW suffered from intensifying competitors each in China and its European markets, greater U.S. tariffs, and the conflict in Iran. VW’s future relies upon to a big diploma on the end result of present negotiations within the European Parliament the place the Industrial Accelerator Act seeks to reverse the current decline in industrial competitiveness.
Talks with the unions proceed
CEO Oliver Blume, at a board meeting earlier this month, proposed doubling job cuts to 100,000 and shutting 4 Volkswagen vegetation in Germany. Different proposals included simplifying the mannequin line-up and reducing world capability by a million to 9 million. Talks with the unions proceed and are unlikely to offer early outcomes.
For Reuters Breaking Views, each cloud has a silver lining.
“This massacre, nonetheless, has an upside. Since information broke that Blume might slash the corporate’s workforce, shares within the automaker have slumped 3%, an indication buyers doubt his potential to win over the supervisory board, which is dominated by public-sector shareholders and union representatives. But when he can persuade them that the corporate’s future is genuinely in peril, they might be extra prepared to swallow painful modifications,” Breaking Views columnist Aimee Donnellan stated.
VW’s ownership structure makes it accountable to its staff, not its shareholders. The supervisory board has final energy with unions holding half of the 20 seats.
VW’s Skoda model presents its Epiq EV (Photograph by Sven Hoppe/image alliance by way of Getty Photos)
dpa/image alliance by way of Getty Photos
Regardless of all the issues, Blume nonetheless has large long-term ambitions for VW income, however, in keeping with Donnellan, the worldwide automotive market is quickly deteriorating.
“Final 12 months, VW generated almost €1 billion ($1.1 billion) price of working revenue from China. However for the 12 months forward, Blume is forecasting earnings might fall as little as €200 million ($230 million) resulting from rising prices of electrical automobiles, competitors and weak volumes. In VW’s dwelling market in Europe, Chinese language rivals like BYD are flooding the market with cheaper, tech-laden battery vehicles. Within the first six months of the 12 months, Chinese language gamers doubled their share of latest automotive gross sales in Europe to fifteen%. That will drive Western carmakers to both settle for market share loss, or to chop costs. In the meantime, unions might bend slightly however are unlikely to permit him to maintain coming again for extra job cuts,” Donnellan stated.
Optimistic numbers
Funding researcher Bernstein noticed some positives in VW’s newest numbers.
“Contemplating the present gloom surrounding the sector, the reiteration of the 4.0-5.5% group working revenue steerage hall for FY26, after a 4.2% margin in 2Q26, was optimistic, even when income steerage was decreased,” Bernstein stated in a report.
Bernstein isn’t so certain the newest information would assist VW’s union talks.
“VW administration is attempting to stroll the tightrope of reassuring buyers whereas on the similar time telling its workforce that the home is on hearth and that painful cuts to capability, requiring important plant closures, are unavoidable. That’s an nearly not possible needle to string and explains our (market carry out) ranking,” the report stated.
In the meantime U.Okay. headquartered funding researcher Third Bridge stated due to the board construction, VW’s salvation received’t come from manufacturing facility closures. VW’s “make or break” issues in China will probably be helped by its partnerships with XPeng and SAIC, which is able to enhance its electrical automobiles.
Can VW develop software program?
However questions stay over VW’s potential to develop software program. The excessive revenue contribution China as soon as delivered is unlikely to return as competitors from native manufacturers intensifies.
Third Bridge stated in a report specialists it consulted are additionally sceptical that Volkswagen’s core model can attain its long-term margin targets of 6.0 to six.5%. Excessive labour prices and legacy manufacturing operations proceed to weigh on profitability, making stronger pricing energy and higher merchandise extra necessary than cost-cutting alone.
