Volkswagen Hit with U.S. Tariffs Worth $1.5 Billion

Source Credit : CNBC

Germany’s Volkswagen on Friday lowered its full-year guidance and reported a sharp drop in second-quarter profit, as the auto giant navigates the disruptive impact of U.S. tariffs and restructuring costs.

Europe’s biggest carmaker posted operating profit of 3.83 billion euros ($4.49 billion) for the three months through June, down 29% from 5.4 billion euros a year ago. Analysts had expected second-quarter profit to come in at 3.94 billion euros, according to a Factset-compiled consensus.

Volkswagen reported second-quarter sales revenue of 80.8 billion euros, also missing analyst expectations of 82.2 billion euros.

The automaker said the impact of U.S. tariffs alone cost the company 1.3 billion euros in the first six months of the year. Restructuring provisions, meanwhile, amounted to 700 million euros over the same period.

Looking ahead, Volkswagen said its 2025 operating return on sales is now expected to range between 4% to 5%, down from a previous forecast of 5.5% to 6.5%. Full-year sales are expected to come in line with the level achieved as last year, compared to a rise of up to 5% previously.

Key earnings highlights:

• Volkswagen reported 80.8 million vehicle sales in the three months through June, down 3% from the same period a year ago.


• Order intake for vehicles in Western Europe rose by 19% in the first half of the year.


• The company said it expects a full-year investment ratio of between 12% to 13% in its automotive division.

The results come as Europe’s automakers struggle to get to grips with a series of industry challenges, including robust competition from Chinese car brands and U.S. President Donald Trump’s import tariffs of 25%.

The automotive sector is widely regarded as acutely vulnerable to U.S. tariffs, particularly given the high globalization of supply chains and the heavy reliance on manufacturing operations across North America.

“If you look at the first half of the year, you see basically a mixed picture,” Arno Antlitz, chief financial officer at Volkswagen, told CNBC’s “Squawk Box Europe” on Friday.

“First and foremost, you see tremendous success of our products, both on the combustion engine side and on the electric vehicle side. In Europe, every fourth vehicle comes from the Volkswagen Group, but as you said, our numbers are significantly down,” he added.

Volkswagen’s CFO said the firm’s ramp up of EVs weighed on margins, noting that margins for EVs are lower compared to international combustion engine (ICE) vehicles.

Aside from that, Antlitz said one-offs such as the impact of U.S. tariffs and restructuring measures had a combined cost of about 2 billion euros.

Shares of Volkswagen rose 3.9% on the day, reversing losses earlier in the trading session.

Volkswagen Stock Price

Trump recently threatened to raise duties on EU auto imports to 30% from Aug. 1, ramping up the pressure on the 27-nation trading bloc. The European Commission, the EU’s executive arm, has since been considering its response.

Volkswagen said it is assumed that U.S. import tariffs of 27.5% will continue to apply in the second half of the year, noting there is “high uncertainty” with regard to trade policy.