Volkswagen in the spotlight: focus on maxi-cuts after a 2025 downturn and conservative estimates for 2026

  (Il Sole 24 Ore Radiocor) - Volkswagen passes the annual accounts and prospects for 2026 on the Frankfurt Stock Exchange, helped by the extensive plan of cuts and savings planned, as well as today's better market disposition in relation to developments in the Middle East. The German group's net profit stood at €6.9 billion last year, 44.3% lower than in 2024. Operating profit fell 53% to EUR 8.9 billion from EUR 19.1 billion in 2024, 'due to US tariffs, charges incurred by the subsidiary Porsche to adjust its product strategy, currency effects and a mix of price-related effects', according to a Volkswagen statement. The operating margin was 2.8 per cent compared to 5.9 per cent in 2024. Excluding special charges, operating profit amounted to EUR 14.8bn including US tariffs and EUR 17.7bn excluding tariffs, Vw said.

The turnover 2025 remained broadly stable at EUR 321.9 billion (-0.8%). The group sold 9 million vehicles in 2025, in line with 2024, with a 5% increase in Europe and 10% in South America, offset by declines due to difficult market conditions in North America and China. The Automotive division's net cash flow rose 24% to EUR 6.4 billion. In the fourth quarter, revenues fell 4.7% to 83.2 billion, operating profit fell 44.6% to 3.46 billion (margin to 4.2% from 7.2%) and net profit fell 1.7% to 3.49 billion. Analysts had expected an average operating profit of EUR 4.13 billion on revenues of EUR 85.16 billion. The company proposed a dividend of €5.20 per ordinary share and €5.26 per preference share, down from the €6.30 and €6.36 paid last year.

In this context, the group announced plans to cut some 50,000 jobs in Germany by 2030, more than previously planned. "Thanks to collective bargaining agreements and downsizing measures, the group has achieved cost savings of around EUR 1 billion in 2025 and is on track to achieve annual net cost savings of more than EUR 6 billion across the group by 2030," said CEO Oliver Blume.

For 2026, Volkswagen expects an improvement in profitability as it continues to focus on reducing costs in what is expected to be another challenging year. The German group said it expects an operating margin of between 4 per cent and 5.5 per cent this year, with revenue growth to be between 0 per cent and 3 per cent higher than last year's figure. "In this challenging environment, we want to keep our internal combustion engine vehicles technologically competitive, continue to invest in innovative electric vehicles and the latest software solutions for our customers, and expand our regional presence, particularly in the US," said CEO Arno Antlitz.

Volkswagen's forecasts are below consensus expectations, while the main gap in fourth-quarter results concerns EBIT, Bernstein analysts write. The company expects an operating margin of 4%-5.5% and a net cash flow for the automotive business of between EUR 3bn and EUR 6bn. This is below consensus expectations of a margin of 5.1 per cent and free cash flow for the auto sector of EUR 5.4 billion, the bank says. Fourth-quarter ebit of EUR 3.46 billion was 13% below expectations, largely reflecting a provision the bank estimates at EUR 600 million for the UK financial regulator's investigation into auto loans. Bernstein says the main message is that the company's previously announced better-than-expected free cash flow came from inventory reductions, lower capital expenditure and lower investment in research and development.