VW Reports €1 Billion Loss as Porsche Struggles Deepen

Volkswagen has reported a loss of more than one billion euros in the third quarter of 2025, marking one of its most difficult financial periods in recent years. The setback is largely attributed to heavy losses at its luxury subsidiary Porsche and growing challenges from tariffs, strategic missteps, and weaker margins in electric vehicle production.

Porsche’s Troubles Pull Volkswagen Into the Red

Volkswagen’s quarterly loss of 1.07 billion euros contrasts sharply with the profit of 1.56 billion euros recorded during the same period last year. Across the first nine months of 2025, the group’s net profit fell by more than 60 percent to 3.4 billion euros, down from 8.8 billion euros a year earlier.

The main source of trouble lies in Porsche’s costly shift in strategy. The Stuttgart-based sports car maker has faced billions in expenses after delaying its transition away from combustion engines. The decision to extend the life of traditional models, combined with major write-downs on Porsche’s business value, wiped 4.7 billion euros from Volkswagen’s balance sheet. Porsche’s own after-tax profits collapsed by nearly 96 percent over the same period, with almost one billion euros lost in the third quarter alone.

Volkswagen’s Chief Financial Officer Arno Antlitz explained that these write-downs, along with new U.S. tariffs and restructuring costs, resulted in total burdens of around 7.5 billion euros. “Without these special effects, our profit margin would have been at a solid 5.4 percent,” he said.

Tariffs, Electric Shift, and Market Pressures

Beyond Porsche’s difficulties, Volkswagen faces a tougher external environment. New import tariffs imposed by the United States have significantly reduced earnings, costing the company up to five billion euros in direct payments and lost vehicle sales. Meanwhile, the expansion of electric vehicle production, though vital for the group’s future, is currently weighing on profits.

Antlitz admitted that electric vehicles still yield lower margins than traditional combustion engines. “The ramp-up of electromobility continues to put pressure on profitability,” he said. Despite this, the company saw a rise in deliveries, with total vehicle sales climbing 1.2 percent in the first nine months to 6.6 million units. Revenue increased slightly to 239 billion euros, supported by strong performance from Škoda and Seat.

The ongoing global chip shortage remains a key risk factor. Volkswagen confirmed its annual forecast only under the assumption that semiconductor availability will remain stable. The European Automobile Manufacturers’ Association (ACEA) has warned that shortages are worsening, threatening production across the continent.

Porsche Strategy Shift Comes at a Heavy Price

Porsche’s management has been under mounting pressure since the company was forced to adjust its product roadmap earlier this year. The decision to maintain combustion engine lines longer than initially planned has come with billions in additional development and compliance costs.

The luxury brand, which was removed from Germany’s DAX index earlier this year, continues to struggle with balancing legacy technology and its high-end electric models. Analysts say Porsche’s reliance on combustion sales in key markets like the United States and China makes it especially vulnerable to regulatory changes and shifting consumer trends.

Volkswagen’s management has defended the decision to restructure Porsche’s strategy, arguing that long-term competitiveness requires flexibility. Still, the immediate financial damage has raised concerns about leadership and planning at the group level.

Core Volkswagen Brand Shows Early Signs of Recovery

While the group as a whole suffers, the main Volkswagen brand is showing modest improvement. After years of underperformance, the division managed to increase its operating profit from 1.28 to 1.48 billion euros over the first nine months, with a stable revenue of about 64 billion euros.

This recovery comes after a sweeping restructuring plan agreed upon in late 2024 between management and labor unions. The program includes up to 35,000 job cuts in Germany by 2030—almost a quarter of the domestic workforce. The cost-saving measures are designed to streamline operations and redirect funds toward electrification and software development.

“The progress in restructuring is visible,” Antlitz said. “We are stabilizing our core brand and the entire group for the long term.” The group’s Czech subsidiary Škoda remains one of its strongest performers, achieving an 8 percent profit margin and 1.8 billion euros in operating income.

Electric Sales Rise, but Regional Gaps Persist

Despite the financial strain, Volkswagen’s sales numbers show encouraging trends in the transition to cleaner technologies. The company delivered 2.2 million vehicles in the third quarter, up 1 percent year-on-year, largely thanks to higher demand for electric cars. Sales of electric models grew by one-third and now account for more than 10 percent of total deliveries.

Europe was the strongest market, while North America and China showed declines. Volkswagen hopes to offset losses in these regions with stronger sales of new-generation EVs and hybrids. However, analysts warn that the group’s profitability will remain under pressure as long as electric models remain less profitable than traditional vehicles.

Stock Market Reaction and Investor Outlook

Despite the heavy quarterly loss, investors have responded cautiously optimistic. Volkswagen’s shares rose slightly in early trading following the earnings report, buoyed by better-than-expected cash flow and steady operational revenue. In its vehicle business alone—excluding financial services—the company reported a net cash inflow of 3.15 billion euros in the third quarter.

Still, confidence in the group’s management remains fragile. The dual challenge of modernizing production while absorbing Porsche’s financial impact continues to test Volkswagen’s resilience. Market analysts expect the company to prioritize cost discipline and efficiency gains while seeking a faster path to profitability in electric mobility.

Restructuring as the Road to Stability

Volkswagen’s management insists that its restructuring strategy is beginning to show results, particularly within its core operations. The company plans to continue consolidating production lines and investing in digitalization to secure long-term competitiveness.

However, the steep losses from Porsche’s delayed transformation highlight the broader challenge facing legacy carmakers in balancing tradition with transition. For now, Volkswagen remains focused on stabilizing its finances and protecting jobs while navigating an increasingly volatile global auto market.