Auto giant Volkswagen posts significant drop in first-quarter profit

German automobile giant volkswagen It reported weaker-than-expected first-quarter profit on Thursday, citing high U.S. tariffs and increased competition from Chinese auto brands.

Europe’s largest automaker reported operating profit of 2.5 billion euros ($2.92 billion) in the first three months of the year, down 14.3% from a year earlier, missing analysts’ expectations by nearly 4 billion euros, according to a consensus compiled by LSEG.

Sales revenue amounted to 75.66 billion euros, a 2.5% decrease compared to the same period in 2025. Analysts expected this figure to be 75.45 billion euros.

“Wars, geopolitical tensions, trade barriers, tighter regulations and intense competition create headwinds. We have managed to make concrete progress in this challenging environment,” Volkswagen CEO Oliver Blume said in a statement.

The results come as Europe’s leading original equipment manufacturers (OEMs) cope with a range of industry challenges, from business uncertainties and high production costs to electric vehicle adoption restrictions and regulatory pressures.

Ongoing Middle East crisis threatens to crimp demand for luxury cars, including Volkswagen’s Blume warning Last month, we said that the Iran war could harm the sales of Porsche and Audi brands.

Volkswagen is currently implementing sweeping layoffs and a major product push as it aims to improve profitability in the face of intense competition from Chinese auto companies. Around 50,000 company-wide layoffs are expected in Germany by the end of the decade.

Volkswagen shares, down slightly from last month, were down more than 17% year-to-date as of Wednesday’s close.

Going forward, Volkswagen said it expects operating return on sales to be between 4% and 5.5% in 2026, after 2.8% in 2025.

Going forward, Volkswagen said it expects operating return on sales to be between 4% and 5.5% in 2026, after 2.8% in 2025.