Volkswagen's profits have fallen 14%. The auto giant is ready for new cost cuts

German auto giant Volkswagen on Thursday, April 30, reported a drop in profits for the first quarter of 2026. It was below analysts' forecasts due to higher duties in the United States, increased competition from Chinese car brands and geopolitical tensions, CNBC writes. The brand warned that in such market conditions, the company's planned cost cuts are not enough, and there will be new measures.

Volkswagen's operating profit sagged 14.3% as Europe's largest automaker earned €2.5 billion in the first three months of the year, a figure that fell short of analysts' expectations of nearly €4 billion, according to the LSEG consensus forecast cited by CNBC.

Sales fell 2.5% to €75.66 billion.

Volkswagen shares first fell 2% after the release of the statements, but then turned around and went into plus 1.4%. Since the beginning of the year, the company's capitalization has fallen by 15%.

The company forecasts an improvement in profitability already this year: from the current 2.8% to 4-5.5%. Chief Financial Officer Arnault Antlitz emphasized that further cost reductions are needed, so Volkswagen intends to "fundamentally" change its business model. The concern plans to reduce the cost of cars without losing quality and simplify operations by reducing the number of models, platforms and levels of bureaucracy.

Citi analysts said the call for even more cost cuts did not come as a surprise to them, "While we support these decisions, it also points to future exceptional costs and underscores the pressure on Volkswagen's core earnings in the EU." They added that the company is making tough but right decisions to remain viable in the face of Chinese competition and regulatory pressure, CNBC reported.

The first-quarter results were released at a time when Europe's leading OEMs are facing a range of challenges, including high production costs and restrictions in the introduction of electric vehicles. The ongoing crisis in the Middle East also threatens demand for luxury cars, as it could hurt sales of the Porsche and Audi brands, CNBC specified.

Volkswagen is already carrying out massive downsizing: the carmaker is expected to eliminate around 50,000 jobs in Germany by the end of the decade.

The problems of the parent concern were shared by its main profit generator - the Porsche brand. Its operating profit in the first quarter plummeted by 22%, while revenue fell by 5.2%. Customer deliveries fell by almost 15% due to the end of production of the 718 Boxster and Cayman models, as well as the elimination of tax duties in the United States.

On April 29, another German auto group, Mercedes-Benz, reported a 17% drop in net profit and a 5% drop in revenue. The main reason was a significant decline in sales in China, which could not be offset even by growth in the U.S. market and in the electric car segment. Mercedes hopes for an improvement in the situation in the second half of the year, but, like Volkswagen management, warns that the conflict in the Middle East could seriously undermine consumer confidence.

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