Volkswagen (ETR:VOWG_p), Europe’s top carmaker, expects at best a slight increase in its 2025 operating profit margin, it said, joining rivals in giving a subdued outlook for the year ahead as the sector battles weak demand and simmering trade tensions.
Like other European automakers, Volkswagen is attempting to produce more affordable EV models to catch up with cheaper Asian rivals, despite facing significantly higher manufacturing costs, a problem it is trying to tackle via a deep cost-cutting drive.
The group’s operating margin is expected in a range of 5.5% to 6.5%, compared with 5.9% in 2024, with a net cash flow outlook in the automotive division of just 2 billion to 5 billion euros ($5.45 billion) - compared with 5.0 billion euros in 2024.
"We cannot be satisfied with this financial outlook," finance chief Arno Antlitz said on Tuesday.
"It reflects the current challenges in the global economy and an industry that is in the midst of a fundamental transformation," he added, pointing to the high costs of ramping up its battery-electric vehicle range and battery cell output.
The outlook for 2025 does not factor in the possible impact of trade tariffs threatened by U.S. President Donald Trump on imports from Mexico or Europe, Antlitz said.
The Volkswagen Group is heavily exposed to Trump’s tariff plans for Mexico and Canada as its Audi and Porsche divisions have no U.S. manufacturing base. The VW passenger car brand’s U.S. sales consist mainly of imports from its Mexican plant while batteries were set to come from a cell plant under construction in Canada.
TRADE WAR FEARS
Antlitz said Volkswagen was sticking to its plans to expand market share in the U.S. despite growing investor fears over the damage Trump’s tariff policies could cause, adding VW could "only concentrate on that which is in our hands".
Ferdinand Dudenhoeffer, head of the CAR think tank at the University of Duisburg-Essen, said Volkswagen was too focused on Germany with its high costs, while tariffs were a real problem, particularly for Porsche and Audi.
"Donald Trump and his tariff wars will not make the situation any easier for Porsche and Audi... additional burdens are to be expected," he said.
Shares in Volkswagen, which have fallen by more than 40% over the past four years, rose 1.6%, with analysts and traders saying the upper end of the margin outlook was above the consensus.
The group proposed a dividend of 6.36 euros per preference share for 2024, down from 9.06 euros paid out for the previous year, reflecting ongoing savings efforts following major job and capacity cuts announced in December.
"The key questions remain over VW’s ability to execute its strategy and to rein in what still appear to us to be profligate levels of R&D and CAPEX spending," Bernstein analysts said.
Volkswagen’s five-year investment plan for 2025 to 2029 totals 165 billion euros, 15 billion euros less than the prior round, it said.
Operating profit fell 15% in 2024 to 19.1 billion euros on revenue of 324 billion euros, in line with estimates by an LSEG poll.
($1 = 0.9203 euros)
