German auto giant Volkswagen on Thursday reported a sharp drop in first-quarter profit, citing mounting pressure from trade tariffs, geopolitical tensions and intensifying competition from Chinese rivals.
Europe’s largest carmaker said operating profit fell by more than 14 percent to 2.5 billion euros (US$2.9 billion) in the first three months of the year, missing market expectations.
Sales revenue also slipped, declining 2.5 percent year-on-year to 75.66 billion euros, as the company grappled with a challenging global environment marked by rising costs and uncertain demand.
“Wars, geopolitical tensions, trade barriers, stricter regulations, and intense competition are creating headwinds,” Volkswagen chief executive Oliver Blume said in a statement.
The results highlight the difficulties facing major European carmakers as they navigate a rapidly shifting industry landscape. Increased US tariffs have weighed on exports, while competition from Chinese manufacturers — particularly in the electric vehicle segment — has intensified both at home and abroad.
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Volkswagen has been under growing pressure to adapt to the rise of more affordable and technologically competitive vehicles produced by Chinese brands, which have expanded aggressively into global markets.
At the same time, geopolitical instability, including tensions linked to Iran, has raised concerns about weakening demand for premium vehicles. Volkswagen previously warned that prolonged conflict in the Middle East could affect sales of its higher-end marques such as Audi and Porsche.
In response, the company has launched sweeping restructuring measures aimed at restoring profitability and improving efficiency.
These include plans to cut around 50,000 jobs in Germany by the end of the decade, alongside a broad overhaul of its product lineup and accelerated investment in new technologies.
Chief financial officer Arno Antlitz said the scale of current challenges meant existing cost-cutting efforts would need to be expanded.
“We must fundamentally transform our business model and achieve structural, sustainable improvements,” Antlitz said, pointing to the need to reduce complexity across product platforms and decision-making structures.
The company is seeking to streamline operations, lower production costs and speed up development cycles as it competes in an increasingly crowded and fast-evolving automotive market.
Despite the weaker quarterly performance, Volkswagen said it expects some improvement in profitability over the full year, forecasting an operating return on sales of between 4 and 5.5 percent in 2026.
However, analysts warn that persistent external pressures — from trade disputes to shifting consumer demand — could continue to weigh on performance in the near term.
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Shares in Volkswagen have struggled this year, reflecting investor concerns about the group’s ability to execute its transformation while maintaining competitiveness against both established rivals and emerging players.
As the automotive sector undergoes one of its most significant transitions in decades, Volkswagen’s latest results underscore the scale of the challenge facing traditional manufacturers seeking to adapt to a new era defined by electrification, digitalization and global competition.
