In the first quarter, Volkswagen AG's earnings fell 40 percent as the German automaker's outlook was clouded by US tariffs and increased manufacturing costs that reduced margins.
The company reported on Wednesday that its earnings before taxes for the three months ending in March were 3.1 billion euros, a decrease from 5.1 billion euros in the same period last year. The group operating margin dropped from six percent to 3.7 percent.
Volkswagen has experienced a decline in profitability as a result of reduced demand in China, a crucial market, as well as increased expenses and excess capacity at its facilities in Europe.
President Donald Trump's tariffs are threatening to further harm profitability, while the US and Europe have seen unequal electric vehicle demand.
Volkswagen maintained its 2025 prognosis, but said that the impact of US tariffs was not taken into account in its prediction of up to five percent sales growth. Nonetheless, it states that it now anticipates an operating return on sales at the lower half of its intended range of 5.5 percent to 6.5 percent.
As the Trump administration continues to shift its stance with delays, exemptions, and disclaimers, European automakers have found it difficult to fully evaluate the effects of US tariffs.
Trump most recently signed an order to remove some charges on foreign goods and stop levies from piling up on top of one another. The action may lower the overall tariffs levied on Audi and Porsche automobiles imported from Europe as well as VW models manufactured in Chattanooga, Tennessee, and Puebla, Mexico.
Volkswagen's flagship sports car brand, Porsche AG, reduced its earnings forecast this week, pointing to the effects of tariffs and lower-than-expected EV sales.
However, the uncertainty surrounding the tariffs has caused some automakers, such as General Motors, Volvo Car, and Mercedes-Benz Group, to completely abandon their projections.
Earlier this month, Volkswagen pre-released its quarterly data, stating that unusual factors had reduced operating profit by roughly 1.1 billion euros. Diesel problems and the effect of US tariffs on autos exported in March were responsible for almost 300 million euros of the charges.
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The German manufacturer reported on Wednesday that its order backlog increased to about 1 million units in the first quarter, indicating strong demand for its new models in Europe.