Going electric hasn’t exactly made the German auto conglomerate more profitable
In Q1 of 2025, Volkswagen Group managed to sell almost exactly the same number of vehicles as it did last year. In fact, sales grew by just 1.4 percent year over year, allowing 2.13 million customers to take delivery. Order demand grew by almost 30 percent, with high-value and redesigned models from Porsche, Audi, and (globally) Skoda driving sales. So far, not a bad quarter, right? So, why has the VW Group posted a 37 percent profit dive compared to this time last year? Apparently, electric vehicles are to blame.
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Volkswagen Group’s after-tax earnings stumbled 40.6 percent compared to last year
Despite more people taking delivery of Porsche, Volkswagen, Audi, and other VW Group vehicles, the Group didn’t post profits commensurate with that growth. Earnings before and after tax dropped right around 40 percent, and the VW Group says it all comes down to growth of electric vehicle sales. Deliveries of EVs more than doubled, growing from 9 to 19 percent, and new battery electric vehicle orders exploded, rocketing up by 64 percent.
Arno Antlitz, Chief Financial Officer and COO of Volkswagen Group, isn’t really celebrating though. “This market success of our electric cars puts pressure on our result,” he says, citing the lower profit margins on electric vehicles. In the VW Group’s case, that correlates to an operating margin decrease to 3.7 percent, down from 6 percent in 2024. His statement also illuminates, though vaguely, how the brand is planning to move from here.
Volkswagen Group
His target is “complementing [a] great product range with a competitive cost base.” That can be read two ways: price hikes, or adjustments and cost-cutting on the supplier side. We tend to favor the latter, especially considering Antlitz talks about tariffs in the same paragraph. “Given the current volatile global economic situation, it is even more important to focus on the levers within our control.”
The Volkswagen Group has no shortage of other challenges ahead, too
While it may be easy for the brand to point the blame at electric vehicles, there are plenty of other reasons the automaker’s profits fell over the last 365 days. Sales are slowing in China, and overall production was lower than last year. Sub-brand Porsche even cut profit outlooks, mostly due to the uncertainty surrounding tariffs. Finally, the giant German company has reduced its workforce by around 1.2 percent since December. When you start piecing the puzzle together, margins might be just one of the VW Group’s thousand cuts.
Final thoughts
Lower margins per unit are likely the bulk of the reason VW Group sold more vehicles but made a lot less money year over year. We’re skeptical that a price hike across brands is the recipe for success, but it might be what it takes. Of course, if the brand still hasn’t figured out how to make good money on EVs, one has to wonder why they’ve just debuted three nearly production-ready new EVs for China — with nearly 30 models coming to market in the next two years. From where we’re standing, it looks like this might be the first of many similar reports in profit drop-offs.