Losses Volkswagen Slips into the Red Because of Porsche

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Billion-dollar losses at Volkswagen: Porsche pulls the group deep into the red—but there are surprising bright spots with electric cars and the core brand.

The Volkswagen Group plunged deep into the red in the third quarter due to issues at its sports car subsidiary Porsche. Bottom line, a loss of $1.2 billion was recorded from July to September, as the Wolfsburg-based (Germany) automaker announced. A year ago, it had still been a profit of $1.7 billion. However, this no longer shocked investors, as experts had anticipated such results. The stock initially rose by 1.5 percent on Thursday.

Adjusted for the special burdens at Porsche and the effects of higher tariffs, especially in the US, the operating profit margin in the quarter would have been 5.0 percent, according to the group. This was slightly better than analysts had expected.

In the first nine months of the current year, the profit shrank by more than 60 percent—from $9.7 to $3.7 billion. This was primarily due to charges amounting to $8.3 billion, mainly from increased tariffs, adjustments to Porsche's product strategy, and write-downs on Porsche's business and goodwill, said CFO Arno Antlitz, according to the statement. Adjustments and write-downs at Porsche alone cost the group $5.2 billion.

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Without these special effects, the profit margin in the first nine months would have been 5.4 percent, said the manager. "That is actually a decent value in the current economic environment." The group was able to slightly increase sales and revenue: Revenue rose by 0.6 percent to $263 billion in the first nine months, and deliveries by 1.2 percent to 6.6 million units.

Porsche had already reported deep red figures for the third quarter last week. The VW subsidiary is struggling with billions in costs due to its recent strategic shift to extending combustion engines. In the third quarter, this resulted in a loss of nearly one billion euros, while in the first nine months, the post-tax profit plummeted by almost 96 percent. This has now also impacted the parent company.

Core Brand Improves

The long-struggling core brand Volkswagen, on the other hand, continued to improve. The operating return on sales rose slightly to 2.3 percent over the nine months. Partly due to the savings program involving planned cuts of tens of thousands of jobs at the core brand, things have been going somewhat better here again. "We are making good progress in restructuring Volkswagen AG and the entire group," said Antlitz. "For the first time in a long time, overhead costs have decreased compared to the previous year."

The company and the union had agreed on a restructuring program for the VW core brand at the end of 2024 after lengthy negotiations. By 2030, more than 35,000 jobs are to be cut, nearly a quarter of the 130,000 jobs in Germany.

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In terms of operating profit, the core brand increased significantly in the first nine months, from $1.4 billion in the same period last year to now $1.6 billion—with nearly unchanged revenue of just under $70 billion.

Things went even better for the subsidiary Skoda: With an 8.0 percent return on sales, the Czechs generated an operating profit of almost $2.0 billion, significantly exceeding the core brand. Revenue stood at $25 billion, about a third of the figure for Wolfsburg, Germany.

Sales Figures RiseIn—cluding for Electric Cars

The group was recently able to increase sales again. In the third quarter, 2.2 million vehicles from all group brands were delivered, one percent more than a year earlier, as the group had announced almost three weeks ago. This was mainly due to strong growth in electric cars and strong figures from subsidiaries Skoda and Seat.

In North America, however, sales declined, as they did in China. On the other hand, things went better again in Europe. Electric car sales across the group rose by a third, accounting for more than one-tenth of all vehicles sold.

US Tariffs And EV Ramp-Up Weigh Heavily

The imposed US tariffs are expected to cost the group up to five billion euros this year, partly due to direct tariff payments and partly because fewer vehicles were sold as a result of the tariffs, estimates the CFO.

And unlike the other special effects, the tariffs are likely to remain in place in the future. "A large part of the mentioned special burdens is one-time and, from today's perspective, will not recur," said Antlitz. "However, the tariff burden will remain."

Profit is also being dampened by the ramp-up of e-mobility. "We are still earning significantly less with them than with combustion engines," said Antlitz. "That puts pressure on margins."

Chip Supply Secured for the Coming Week As Well

Elsewhere, however, there was some relief. Despite the current stalling supply of chips, there should be no production stoppages next week. As of today, production at all German locations is secured for next week, the group announced. This also applies to the subsidiaries Audi, Porsche, and VW Commercial Vehicles, according to a spokesperson upon request.

However, it is still unclear how things will proceed after that. "In light of the dynamic situation, short-term impacts on the Volkswagen Group's production network cannot be entirely ruled out," said the spokesperson.

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