Volkswagen’s namesake brand hardly generated any returns in the first quarter after costs linked to European emissions rules and US tariffs weighed on results.
VW’s operating margin fell to 0.5%, from 3.9% in the same period last year, the brand said Friday.
It’s sticking to its goal of a 4% operating margin for the full year, which will require exceeding that target in one or more quarters.
The maker of the Golf hatchback, long crippled by slumping profitability, is cutting costs to offset lower demand in Europe and China.
In March, the brand postponed its goal for a 6.5% operating margin by three years to 2029.
Increasingly stiff competition in China and muted sales in Europe — which has yet to return to pre-pandemic demand levels — have weighed on profitability at the automaker.
President Donald Trump’s tariffs are threatening to hurt profits further.
VW’s EV sales in the period rose 40% amid an upswing in demand for models including the ID. 4 crossover sport utility vehicle.
Cost-cutting measures and momentum from new models will allow the brand to reach its margin target this year, its finance chief David Powels said.
Group Chief Executive Officer Oliver Blume late last year struck a deal with unions to make the brand more efficient.
Measures include cutting capacity at its German sites by several hundred thousand units and reducing the workforce by more than 35,000 over the next five years.
VW is planning several budget EVs to win over Europe’s squeezed consumers, with the first of these — a sub-€25,000 (R520,000) EV dubbed the ID. 2 — all to begin deliveries next year.
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