Volkswagen posts 14% drop in first-quarter profit on tariff pressure, China competition

German auto giant Volkswagen on Thursday reported weaker-than-expected first-quarter profit, citing higher U.S. tariffs and intensifying competition from Chinese car brands.

Europe's biggest carmaker posted operating profit of 2.5 billion euros ($2.92 billion) for the first three months of the year, down 14.3% from a year ago and missing analyst expectations of nearly 4 billion euros, according to an LSEG-compiled consensus.

Sales revenue came in at 75.66 billion euros, down 2.5% from the same period in 2025. Analysts had expected this figure to come in at 75.45 billion euros.

"Wars, geopolitical tensions, trade barriers, stricter regulations, and intense competition are creating headwinds. In this challenging environment, we have managed to make tangible progress," Volkswagen CEO Oliver Blume said in a statement.

The results come as top European original equipment manufacturers (OEMs) navigate several industry challenges, from trade uncertainties and high production costs to electric vehicle adoption constraints and regulatory pressure.

The ongoing Middle East crisis is also threatening to hamper demand for luxury cars, with Volkswagen's Blume warning last month that the Iran war could hurt sales of its Porsche and Audi brands.

Volkswagen is currently implementing sweeping job cuts and a major product offensive as it seeks to boost profitability amid intense competition from Chinese car companies. Around 50,000 jobs are expected to be shed across the company in Germany by the end of the decade.

Volkswagen Chief Financial Officer Arno Antlitz said, however, that the current market environment means the firm's planned cost reductions were not enough.

"We must fundamentally transform our business model and achieve structural, sustainable improvements. This includes improving the cost structure of our vehicles without compromising product substance, significantly reducing overhead costs, increasing the efficiency of our plants, and accelerating technology development and decision-making," Antlitz said.

"We can only achieve this by significantly reducing complexity – in our product portfolio and technology platforms, as well as in the number of entities and decision-making layers. This is what we will focus on in the coming months," he added.

Shares of Volkswagen, which are slightly lower over the last month, were down more than 17% year-to-date at Wednesday's close.

Looking ahead, Volkswagen said it expects operating return on sales to be between 4% and 5.5% in 2026, after 2.8% in 2025.