Special Feature: Focusing on the Q2 2026 Earnings Season in the US Stock Market

The automaker stated that the downgraded forecast is primarily due to a sluggish Chinese market, with its Q2 deliveries in the region plummeting by approximately 37% year-over-year.

A technician wearing white gloves cleans the black-and-white VW logo on a red car body. Volkswagen has lowered its annual sales and vehicle delivery expectations.

Key Takeaways

Volkswagen has cut its full-year sales and delivery outlook, driven by two main factors: a sharp decline in sales within China and the rapid expansion of Chinese automakers' market share in Europe.

Impacted by a sales plunge in the Chinese market and aggressive inroads by Chinese domestic brands into core European markets, Volkswagen has reduced its annual sales forecast.

CEO Oliver Blume stated that a cascade of challenges means the company must cut factory capacity and lay off tens of thousands of employees.

During a conference call on Friday, Blume remarked, "This is not a crisis exclusive to Volkswagen, but a crisis for the entire automotive industry." Earlier this month, he submitted a sweeping restructuring proposal to the company's supervisory board, which is expected to finalize the plan in the coming months.

Volkswagen now forecasts a 3% to 7% year-over-year decline in full-year vehicle deliveries, a reversal from its previous expectation of flat deliveries. Revenue guidance has also been lowered, with the company projecting a potential decline of up to 3% for the full year, compared to its forecast three months ago of flat to 3% growth.

Volkswagen acknowledged that the primary drag on this performance revision stems from the Chinese market, where its Q2 deliveries fell by approximately 37% year-over-year.

China, which once contributed over half of Volkswagen's profits, has prompted the company to invest heavily in various initiatives in an attempt to return to a growth trajectory. However, amid a shrinking overall Chinese auto market and intensifying competition, the recent launch of several new models has yielded minimal results.

Having already implemented a broad cost-reduction program for 2025, Volkswagen is now determined to intensify its cost-saving measures as global operational risks escalate. External pressures include US tariffs, the expiration of US electric vehicle subsidies, rising manufacturing costs, and a concentrated push by Chinese automakers to launch new vehicles in Europe.

Official data released on Thursday showed that four Chinese automakers—BYD, Geely, SAIC, and Chery—collectively held an 11.2% share of the European auto market in June, up from 7.5% in the same period last year.

CFO Arno Antlitz stated, "Chinese competitors are establishing factories in Southern and Eastern Europe. These plants operate with low capacity utilization but offer significant cost advantages, making it difficult for us to compete."

Volkswagen's initial restructuring plan, agreed upon with powerful German labor unions, involved cutting 50,000 jobs in Germany by 2030, saving billions of euros annually, while ensuring no large-scale plant closures in the country.

However, in an internal memo last week, Blume noted that the company's overall costs in administration, infrastructure, and various business support segments remain 20% higher than industry peers. Closing this cost gap would theoretically require an additional 50,000 job cuts.

The new proposal outlines management's plan to eliminate 500,000 units of production capacity in Europe by 2030. Blume stated last week that the company intends to halve its vehicle lineup and that the long-term survival of four German factories beyond the next decade is not guaranteed.

Volkswagen did not release further details in its Friday earnings report. Blume indicated that all German factories currently have models in production, making any closures before 2030 unrealistic. After the summer break, management will visit various German plants in August for multiple rounds of discussions with union representatives and frontline employees.

Blume added, "Plant closures will always be our last resort."

The Volkswagen Group encompasses brands including Audi, Porsche, and its core VW brand. In the second quarter, group revenue reached 82.4 billion euros (equivalent to $93.8 billion), a 2% increase year-over-year, while operating profit fell 9.5% to 3.47 billion euros, resulting in an operating margin of 4.2%. Analysts polled by FactSet had forecast revenue of 81.2 billion euros and operating profit of 4.02 billion euros, indicating that profit fell short of market expectations.

Despite weaker sales, Volkswagen maintains its full-year operating profit margin target range of 4% to 5.5%, which is higher than the 2.8% actual margin recorded for the full year 2025.