Volkswagen Group has sustained a significant financial blow in the first half of 2025 following the imposition of steep U.S. import tariffs introduced under President Donald Trump. The German automaker revealed on July 25 that tariffs had shaved off €1.3 billion from its operating profits, prompting a downward revision of its annual margin forecast and spurring the company to explore aggressive mitigation strategies.
Volkswagen’s first-half operating profit plunged to approximately €6.7 billion, down by nearly a third from the same period last year. Of these losses, €1.3 billion was directly attributable to tariff costs, alongside €700 million linked to restructuring efforts at Audi, the Volkswagen Passenger Cars division, and its software subsidiary Cariad. Additional strain came from compliance and emissions-related regulatory expenses. Despite revenues holding steady at around €158 billion, the combined burdens have led to a notably weaker financial performance.
As a result, the company has revised its guidance for 2025, now projecting operating margins of 4% to 5%, compared with its prior estimate of between 5.5% and 6.5%. This forecast hinges on whether the existing 27.5% tariff regime remains intact or is reduced to 10%. If tariff relief materializes, Volkswagen expects its margins to gravitate toward mid-point guidance. Otherwise, the lower end of its revised forecast remains likely.
The tariffs, which include a new 25% levy on automotive imports layered atop an existing 2.5% base duty, have proven particularly punishing for German manufacturers. One analyst estimated that German brands—including Volkswagen, BMW, and Mercedes-Benz—face tariff-related cost hikes of up to $11,894 per vehicle, in contrast to domestic manufacturers like Tesla, which avoid the levy altogether.
Volkswagen is now pursuing proactive responses, including direct engagement with the Trump administration. CEO Oliver Blume has proposed a model whereby every dollar the company commits to American manufacturing reduces its tariff exposure by an equivalent amount. Volkswagen has already pledged $2 billion toward a new plant in South Carolina to build Scout pickup trucks and SUVs and will invest over $5 billion in a joint venture with Rivian. Additionally, plans are underway to begin manufacturing the first Porsche and Audi models in the U.S., signaling a strategic shift toward increasing domestic production.
Beyond immediate financial blow, Volkswagen is adjusting its broader operations. The automaker confirmed plans to eliminate up to 35,000 jobs in Germany by 2030 as part of a sweeping restructuring strategy aimed at trimming €15 billion in annual costs. This effort reflects broader challenges across its premium brands, with Porsche reporting operating margin drops from 16.4% to 5.2%.
The ripple impact and financial blow is also evident across the broader European car industry. Stellantis has absorbed losses of around €300 million, while Volvo has temporarily suspended U.S. model sales amid slipping revenues. German auto exports to the United States fell sharply—down 13% in April and plunging 25% in May year-over-year, as reported by the VDA. Meanwhile, Puma warned it faces an €80 million gross profit loss due to tariffs, contributing to an 18% share price drop.
Within Germany, chief financial officer Arno Antlitz described the company’s outlook as “fragmented,” emphasizing uncertainty over the future direction of U.S. trade policy. At the European level, officials are racing to negotiate a broader trade deal with the U.S. before a self-imposed August 1 deadline, which could settle most tariffs at 15%, though auto-specific exemptions remain unclear.
Volkswagen’s travails underscore how geopolitical trade policy can swiftly reshape global automotive economics. As the company retools its production and capital strategies, the outcome will likely hinge on whether tariff measures ease or persist through the remainder of 2025.
