German car maker Volkswagen has cut its 2026 sales revenue forecast after reporting weaker first-half earnings, as it battles Chinese competition, tariff pressures and declining profitability.

The company reported first-half operating profit of €5.9bn, down 11.6% from €6.7bn a year earlier, with its operating margin falling to 3.8%. Second-quarter operating profit declined 9.5% to €3.5bn, below analyst expectations of about €4.3bn, while revenue edged down 0.2% in the first half despite a 2.0% rise in the second quarter to €82.4bn.

Vehicle deliveries fell 8.4% to four million in the first six months of the year as a 31.6% slump in China overshadowed growth in South America, Western Europe and Central and Eastern Europe. However, Volkswagen said its European order bank has risen around 12% since the end of 2025, while orders for battery electric vehicles increased by more than 50%. The new Electric Urban Car Family has attracted more than 70,000 orders, significantly ahead of expectations.

Shares were down around 3% today after second-quarter earnings missed expectations and and cut its sales outlook.

Volkswagen now expects 2026 sales revenue to range between a 3% decline and no growth, compared with previous guidance for growth of up to 3%. But the company insisted it remains on track to deliver an improved operating margin in the second half as it accelerates the biggest restructuring programme in its history.

Reuters recently reported that Volkswagen is considering cutting up to 100,000 jobs and shutting four German factories amid the biggest restructurings in its history as it seeks to reduce costs and improve competitiveness against Chinese manufacturers. The company currently employs around 663,000 people worldwide.

CEO Oliver Blume said: "“For the full year, we expect a robust performance above the prior year in a challenging environment – even though our operating result in the first half was around 12% below the prior year. Applying disciplined cost management, we have managed to offset continued unavoidable headwinds in the double-digit billions.

"At the same time, the environment for the automotive industry remains extremely challenging: geopolitical crises, trade conflicts, high regulatory requirements, volatile markets and intensified competition. In an unprecedented risk scenario, Volkswagen Group enters the next phase of its transformation – from a position of strength and with a clear understanding of the opportunities ahead. With the most comprehensive and far-reaching programme in the company’s history – for products, technologies, competitiveness, structures and growth areas."

CFO and COO Arno Antlitz added: "Our operating margin of 3.8% remains too low and underlines the call to action. In an environment where the Chinese total market is down by 20% and Chinese competitors are increasing exports and thereby competitive pressure in Europe, the currently planned initiatives are not sufficient.

"We must accelerate efforts to structurally lower our cost base and sustainably improve our earnings quality. This includes improved vehicle cost structures, lower overhead costs, higher efficiency in our plants, faster technology development, and quicker decision-making processes. Therefore we need to significantly reduce complexity - in our product portfolio and platforms, in our equity portfolio, as well as in our leadership and decision-making structures."

---