"When you're at the bottom of a pit, the worst thing that can happen is someone telling you the pit is deeper than you thought."
That's exactly what Volkswagen did on Tuesday. Europe's largest automaker dropped its 2025 numbers and, along with them, a warning: next year is going to be another hellscape.
The numbers nobody wanted to see
Operating profit of 8.9 billion euros. Sounds like a lot? Sure it does. Until you remember the year before it was 19 billion. A drop of 53%. More than half the profit vanished. Poof. Gone like a politician's promise during election season.
And mind you, the analysts — those oracles of Excel spreadsheets — had already dialed expectations down, forecasting 9.4 billion. Volkswagen managed to disappoint even the market's pessimism. Now that's talent.
Revenue? That stayed nearly flat at 322 billion euros (versus 324.7 billion in 2024). In other words: the company sold pretty much the same amount, but made way less on each car. The operating margin plummeted from 5.9% to a pathetic 2.8%. For those who don't speak finance-ese: for every 100 euros that came in, less than 3 euros of operating profit remained. For a company the size of Volkswagen, that's the equivalent of working all month just to pay the bills and buy yourself a coffee at the end.
The triple curse: Trump, China, and Porsche
Three forces are crushing the Wolfsburg giant like it's an aluminum can.
First: Trump's tariffs. The auto industry is obscenely globalized. Parts cross borders like tourists on a cruise ship. When the U.S. slaps tariffs on everything, the entire supply chain starts bleeding. And Volkswagen, with heavy operations in North America, gets pummeled from every direction.
Second: China. Remember when Volkswagen was the queen of the Chinese market? Yeah, well. Chinese automakers — BYD leading the charge — are eating the Europeans' breakfast, lunch, and dinner. In the world's largest automotive market, VW is losing ground every single quarter. It's like watching a boxer who was champion for 20 years getting worked over by some kid who just came up from the amateur ranks.
Third: the "strategic shift" at Porsche. In fancy corporate-speak, that means "Porsche isn't performing the way we wanted and we're burning a fortune to reposition the brand." Money up in smoke.
The CFO keeps smiling (and keeps his nerve)
Arno Antlitz, the guy who doubles as both COO and CFO — because at Volkswagen apparently nobody gets a day off — called 2025 "really challenging." Understatement of the year.
But he dropped an interesting nugget: Volkswagen managed to slightly increase its market share in Europe, even with Chinese competition breathing down its neck. And in EVs? 27% market share. More than in combustion engine cars. That's no small feat.
If there's a sliver of light in this whole mess, that's it. The bet on EVs in Europe might be what saves this company's neck in the coming years. Might be.
And 2026?
The company itself projects revenue growth between 0% and 3%. Analysts were hoping for more. The operating margin should climb to somewhere between 4% and 5.5% — better than 2025, but still below where it was in 2024.
And then there's the Middle East conflict. Antlitz said that, for now, the impact is limited because they have long-term energy contracts. Hedged, as the finance bros say. But "for now" is a phrase that ages really badly.
Shares rose 4% on the day of the earnings release — the market was probably expecting worse. But year-to-date, the stock is down more than 12%.
What's the takeaway here?
Volkswagen is a perfect portrait of what happens when the world changes and you're slow to change with it. The Chinese went all-in on EVs while the Europeans were debating regulations. Trump slapped on tariffs while the auto industry depended on global supply chains. And now the bill has arrived.
Warren Buffett likes to say that "only when the tide goes out do you discover who's been swimming naked."
The tide went out. And Volkswagen is standing there, trying to find a towel.
The question that remains is: with a 2.8% margin, tariffs rising, and China advancing, how long can a company this size hold out before it has to make cuts that really hurt? Because shutting down a factory in Germany isn't like closing a corner shop — it's a political, social, and economic earthquake.
Keep your eyes on this one. This soap opera is far from over.
