Volkswagen lost €1.3 billion due to US duties. What will happen to the auto giant's shares?

Volkswagen, Europe's largest automaker, reported a sharp drop in second-quarter profit amid pressure from U.S. import duties, wrote CNBC. They caused the company to post a €1.3 billion loss in the first six months of the year. Volkswagen shares collapsed 4% afterward, but quickly reversed and went into the plus side. According to analysts' estimates, they remain undervalued and have upside potential. 

Volkswagen's second-quarter operating profit dropped by 29% to €3.83 billion, below the consensus forecast of €3.94 billion. Revenue also fell short of expectations of analysts surveyed by FactSet, coming in at €80.8 billion against an estimate of €82.2 billion.

For the quarter, the automaker worsened its 2025 operating margin forecast to 4-5% from 5.5-6.5%, and lowered its expected sales growth from 5% to zero year-on-year.

Management Volkswagen noted that the decline in profits was due to the growing share of lower-margin electric vehicles in the sales mix, as well as the negative impact of business restructuring and a 25 percent duty on U.S. car deliveries. The duties caused the company to post a loss of €1.3 billion in the first six months of the year - almost double that due to restructuring. According to CFO Arno Antlitz, despite successful product launches and progress in business transformation, operating performance remains under pressure. The company predicts that the 25 percent duties will continue in the second half of the year, and does not rule out further deterioration of conditions. 

Volkswagen shares collapsed by almost 4% immediately after the report was published, but then recovered the fall and went into growth. At the time of publishing this text, they were trading 1% above their last close. Since the beginning of the year, the company's value has risen about 15%, almost twice as much as the DAX index.

According to Morningstar analyst Rella Saskin, there are two main factors weighing on Volkswagen's stock right now. The U.S. was a key growth area for the company, but it has had to suspend exports of cars from Mexico to the U.S. market because of duties. The second circumstance is an unjustified bet on China. The "in China for China" strategy no longer looks realistic, Saskin says. Volkswagen was going to invest in setting up an independent office, research centers and technology in the PRC to regain its leading position in the region. However, localized electric car brands such as BYD are rapidly reclaiming market share, and competition is getting tougher.

All these difficulties have already been reflected in the financial results of the first quarter, the analyst noted ahead of the report for the second quarter. Nevertheless, according to Morningstar estimates, Volkswagen shares remain undervalued. They are trading at around €95, well below the fair valuation of €172, according to the agency. According to Morningstar's rating, the company's securities have room for growth if the external environment stabilizes.

Analysts at Trefis Team also pointed out that Volkswagen shares look undervalued. Their dividend yield is around 7%, making them attractive to investors in the long term. The company has a number of long-term advantages, analysts point out: a broad portfolio of brands, economies of scale in unifying platforms, and a focus on vertically integrating battery production, which could potentially improve margins.

None of analysts advises to sell Volkswagen shares, follows from Yahoo Finance data. 11 have given a buy recommendation, while 9 suggest holding the securities bought in the portfolio. The consensus target price is around €115 , suggesting a potential upside of 20% from current levels, 

Volkswagen continues its aggressive expansion in the electric car market, reports CNBC. The share of electric cars in total sales has reached 11% globally, and in Europe, it is even higher. Orders for electric cars jumped 62% in the first half of 2025. In South America, sales rose 19%, in Western Europe 2%, and in Central and Eastern Europe 5%.

This partially offset a 3% drop in China and a 16% drop in North America, where the main pressure came from duties.

The auto giant is also beginning a major restructuring of its business in Germany, Forbes writes. The plan is to cut production capacity by more than 700,000 vehicles and reduce staff by 35,000 by the end of the decade. The measures are aimed at restoring profitability in Europe, where demand is falling and costs remain high.

This article was AI-translated and verified by a human editor