On Wednesday, German auto giant Volkswagen reported a steep 37% drop in first-quarter operating profit to €2.9 billion ($3.3 billion), citing global economic volatility and the disruptive effects of U.S. auto tariffs. The results underscore mounting pressure on international carmakers as they navigate shifting trade policies and regulatory burdens.
The company confirmed that its operating profit fell short of analyst expectations, which had hovered around €4 billion. Earlier this month, Volkswagen warned that a one-time impact of around €1.1 billion would affect its quarterly earnings. First-quarter sales revenue, however, rose 2.8% year-over-year to €77.6 billion, supported by stronger vehicle sales outside China.
Volkswagen sold 2.1 million vehicles in Q1, a slight increase of 0.9% from the previous year. Order intake in Western Europe surged 29%, reflecting strong demand despite macroeconomic uncertainty. The net cash flow landed at -€0.8 billion, but the company noted that this was an improvement over the prior year.
According to the automakers’ CFO and COO, Arno Antlitz, he called the quarter a “mixed start” to the fiscal year.
The earnings update comes just one day after U.S. President Donald Trump signed an executive order softening certain auto tariffs. While the 25% tariff on imported vehicles remains in place, the order prevents additional levies on materials like steel and aluminum from stacking on top, easing overall costs. A separate 25% tariff on imported auto parts set to take effect May 3 will also proceed, though U.S.-assembled vehicles may be eligible for partial reimbursements for up to two years.
Volkswagen acknowledged that ongoing political instability, rising trade restrictions, and tightening emissions regulations could weigh on full-year performance. The company now expects its key financial metrics — operating return on sales, net cash flow, and net liquidity — to land at the lower end of its 2025 guidance.
