Volkswagen Posts €1b Loss On Tariffs

Volkswagen has announced its initial quarterly deficit in half a decade, totaling €1.07 billion ($1.24 billion), while the prominent German automaker confronts escalating pressures stemming from American tariffs, a sluggish shift to electric vehicles, and difficulties within its upscale division Porsche.

This deficit, logged from July through September, represents Volkswagen’s earliest one since the second quarter of 2020, a period when the firm suffered blows from the COVID-19 outbreak. Even with this reversal, the quarter’s income edged up marginally by 2.3 percent to reach €80.3 billion, bolstered by moderate increases in worldwide automobile deliveries.

Volkswagen’s top finance executive, Arno Antlitz, stated that the outcomes were “much weaker compared to the same period last year,” pointing to the effects of elevated tariffs, tactical shifts at Porsche, and €7.5 billion in impairments tied to the sports car producer. He clarified that trade tariffs imposed by US President Donald Trump by themselves were draining Volkswagen of roughly €5 billion each year.

The firm is further challenged in maintaining its edge in China, its biggest marketplace, where robust domestic producers and a swift move to electric cars have chipped away at its portion of the market.

Porsche, formerly the highest-earning segment of the Volkswagen conglomerate, has evolved into an expanding burden. In the face of demand for electric variants that fell short of projections and resistance from longstanding buyers who continue to favor gasoline-fueled performance vehicles, Porsche lately lowered its earnings goals and postponed intentions to eliminate combustion engines. Such developments compelled Volkswagen to shoulder substantial monetary hits and slash the recorded worth of its stake in Porsche.

Compounding these woes, Volkswagen contends with a 15 percent duty on automobile shipments to America as part of a fresh EU-US pact rolled out in July, reduced from 27.5 percent yet remaining well over the prior 2.5 percent level that existed before the onset of Trump’s tariff conflicts. Additionally, the business encounters duties on components brought in from abroad, even though it runs a production facility in Tennessee.

In efforts to soften these blows, Antlitz indicated that Volkswagen was pondering hikes in prices for its US-sold cars and the construction of an Audi assembly site in America to boost domestic output and lessen reliance on overseas sourcing. “Localisation of parts in the US is exactly what we’re looking at,” he remarked, observing that a ruling on the prospective Audi facility would come forth this year.

Apart from tariff-related matters, Volkswagen persists in battling the ongoing repercussions of the worldwide chip scarcity. Conditions deteriorated following the takeover of the China-based semiconductor firm Nexperia by Dutch officials, which led Beijing to prohibit shipments of its semiconductors abroad. The European Automobile Manufacturers Association (ACEA) has cautioned that semiconductor availability is “rapidly dwindling,” and Volkswagen has conceded that it cannot dismiss the possibility of brief plant closures.

“We secure production day-by-day, week-by-week,” Antlitz commented, further noting that the firm’s semiconductor procurement was assured solely “until the end of next week.”

This recent reversal highlights wider predicaments afflicting Germany’s automotive sector, which contends with declining orders, heightened rivalry, and an expensive pivot to electric transportation in the midst of international political frictions and commercial disputes.

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