Volkswagen: fresh concerns over its finances

The massive 6 billion write-down on the value of its stake in Porsche and the ongoing difficulties in the Chinese market are weighing on Volkswagen’s results, prompting the company to revise its 2026 forecasts downwards. The German group has lowered its outlook for the operating margin, partly due to the costs and provisions linked to the job-cutting plan launched in recent weeks: the forecast is now for an impact on turnover of no more than 1 per cent, down from the previous range of between 4 per cent and 5.5 per cent. Shares plummeted by as much as 7.5 per cent following the announcement, marking the biggest intraday fall in a year.

Overall, Volkswagen expects negative effects in the region of 10 billion (900 million of which were already recognised in the first half of the year, with the majority of the remainder recognised in the third quarter) to weigh on results. The group forecasts turnover of around 315 billion for 2026, broadly in line with the 321.9 billion recorded in 2025. The most significant deviation, however, as mentioned, is in operating profit. Volkswagen anticipates impacts of around 2 billion in the second half of the year linked to the expansion of early retirement schemes and the planned sale of Volkswagen Osnabrück. This drastic cut in forecasts follows the hard-won agreement reached with workers this month, which will double the job cuts to 100,000 globally and for which provisions have been set aside. The car manufacturer has also warned of a ‘further deterioration in the market environment, particularly in China, as well as an accelerated shift in demand towards battery-electric vehicles’. The Chinese car market has slumped by more than a fifth up to August this year, partly due to the prolonged crisis in the property sector, but for Volkswagen the decline has been even steeper, linked to its difficulty in offering a range of competitive electric vehicles.

The profit warning has ultimately raised questions about the Porsche brand – in which Volkswagen holds a 75.4 per cent stake – which has been hardest hit by US tariffs and the slump in demand for foreign luxury brands in China. Porsche – which just a few days ago announced the completion of the sale of its stake in Bugatti, generating extra proceeds of one billion euros – is preparing for a Capital Markets Day on 7 October, at which it is expected to set out its new financial targets and medium-term strategies. Volkswagen has stated that the write-down follows an update to its long-term planning and revised estimates regarding Porsche’s valuation, suggesting that the adjustment is linked to this process.