The German carmaker has just published its results for 2025. They show a sharp decline in operating profit by 53.5%. up to EUR 8.9 billion. The company's CEO, Oliver Blume, blamed the tariffs imposed by Trump for the company's worst result in 10 years.
VW has spent decades building a global supply chain. In the new era ushered in by Trump's trade wars, this strategy no longer works. Additionally, Germany has one key factor.
Problems for the German company include, in particular, a decline in sales share on the Chinese market. The carmaker must also fight to protect its key European market from Chinese expansion.
With the United States effectively blocking Chinese cars with high tariffs and a ban on connected cars, Chinese automakers are looking for new customers and have turned their attention to Europe.
“We will have to do more because our costs in Europe are still too high and we have to compete with our competitors in Europe,” Blume said, adding that this also applies to Chinese brands. “There is a lot of business potential for the Chinese in Europe, so we have to fight.”
Oliver BlumeMaya Cellixa/Getty Images for Icons of Porsche Dubai / Stringer / Getty Images
Volkswagen and its German competitors enjoy strong brand loyalty in their home market, but Blume warned that it was only a matter of time before Chinese automakers began making inroads into the market.
China was once Volkswagen's largest market and source of revenue. However, the shift to electric vehicles and Chinese consumers' preferences for domestic brands have weakened the company's position. VW is introducing new electric vehicles to the Chinese market this year as it looks to regain its position as the country's top carmaker.
However, the loss of the leadership position in China means significantly lower revenues in Germany and less funds to finance factories that incur higher energy and labor costs.
The cuts will affect all VW brands
However, the trade war unleashed by US President Donald Trump threatens Volkswagen's globalization strategy – and its profits. An example of the fact that VW's old approach no longer works is the company's extensive production in Mexico, where costs are lower. The free trade agreement allowed exports from that country to the United States. But Trump's tariffs of 27.5%. for all goods from Mexico, they blocked this distribution channel.
“We have a strong position in Mexico. However, it is no longer profitable to export products from Mexico to the United States,” Blume told the media.
The next obstacle is Porsche. This brand's luxury cars are manufactured in Europe, which exposes the company to American customs duties. Volkswagen currently expects revenue this year to remain flat or grow by just 3 percent. “We operate in a fundamentally different environment,” Blume said.
Stagnant growth means the flagship German carmaker will continue to cut costs and jobs, including taking on the politically difficult task of closing factories in the country.
The article continues below the video
In 2024, Volkswagen announced austerity measures that led to a loss of 35,000. jobs and the closure of German factories – for the first time in history.
This number will increase to 50,000. jobs in Germany by 2030. The cuts will affect all brands, including Audi and Porsche. However, the EU's push for rearmament could represent a potential opportunity as arms makers look to take advantage of weak demand in the automotive industry and exploit this potential to mass produce weapons.
“No decision has been made,” Blume said in reference to the VW plant in Osnabrueck, which may close. “We are in talks with companies from the defense sector.”
I’m Ashley Davis as an editor, I’m committed to upholding the highest standards of integrity and accuracy in every piece we publish. My work is driven by curiosity, a passion for truth, and a belief that journalism plays a crucial role in shaping public discourse. I strive to tell stories that not only inform but also inspire action and conversation.
