Volkswagen Group Releases 2025 Financial Report; China Region Profit Reaches Upper Limit of Expectations

On March 10th, Volkswagen Group released its 2025 financial report, which already shows typical signs of mid-term transformation: despite controlling the decline in group-wide sales volume and revenue to within 1%, operating profit plummeted by 54%, after-tax profit dropped by 44%, and operating margin decreased further from 5.9% last year to 2.8%. The increase in electric vehicle sales share and the loss of market share by Porsche, the “profit cow,” are the main reasons for the profit decline.

Although Volkswagen Group’s business in China still faces significant pressure, its profitability in 2025 has reached the upper limit of expectations. According to the equity method, Volkswagen Group’s operating profit in China for 2025 is approximately €958 million. In the 2024 financial report, Volkswagen Group had previously forecasted that China’s profit would further decline to between €500 million and €1 billion, a decrease of 40%–70%. Volkswagen Group China’s CFO, He Baichuan, believes that the company’s operating profit in China reaching the upper end of the 2025 guidance indicates strict cost management and effective response to market pressures.

At the earnings conference, Volkswagen Group stated that after three years of adjustments, the group’s transformation has made substantial progress. Meanwhile, the industry environment has also undergone fundamental changes. Therefore, Volkswagen Group “will continue to move forward along the established path.”

2026 is a critical year for Volkswagen’s electric transformation, where the “see-saw effect” between EV sales and profits will become more apparent. Volkswagen Group’s CFO and COO, Arno Antlitz, said that optimizing costs and improving profitability will be the focus in the coming months. Especially with the launch of up to 20 new intelligent electric vehicle models in China, which will be a key factor influencing Volkswagen Group’s financial performance in 2026.

Entering the Mid-Transformation Phase

The internal and external challenges faced by Volkswagen Group intensified further in 2025. U.S. tariffs, tense geopolitical relations, exchange rate factors, and the electric transformation expenses of Audi and Porsche have pushed this automotive giant into a deep phase of transformation.

In 2025, Volkswagen Group achieved a total sales revenue of €321.9 billion, roughly flat compared to the previous year; operating profit was €8.9 billion, a sharp decline of 54% from €19.1 billion last year; after-tax profit was €6.9 billion, down 44% from €12.4 billion in the same period last year.

In terms of terminal sales, Volkswagen Group sold about 9 million vehicles worldwide in 2025, roughly the same as the previous year. Notably, Europe (+5%) and South America (+10%) saw significant growth. From an order perspective, orders in Europe increased by about 13% year-over-year, with pure electric vehicle orders up approximately 55%, accounting for about 22% of pending deliveries, becoming the main driver of order growth. This contrasts sharply with the decline in EV share in China, which fell back to levels from four years ago.

Regarding the performance of the three major brand clusters, the “core” brands (Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, Skoda, SEAT/CUPRA) remained stable, with slight increases in sales volume and revenue, contributing 56% of the group’s sales, 45% of revenue, and 77% of operating profit. Benefiting from a higher proportion of higher-priced pure electric models, the “progressive” brand cluster (Audi, Lamborghini, Bentley, Ducati) also saw slight year-over-year growth in sales revenue. However, both the operating profit and profit margins of these two brand clusters continued to decline.

The continued decline of Porsche, the “luxury sports” brand, became the biggest variable. In 2025, Porsche sold 270,000 units, down 13% year-over-year. Operating profit plummeted from €5.3 billion in 2024 to just €9 million, an 84% decrease. The operating margin fell from 14.5% to only 0.3%.

As Volkswagen Group’s most profitable brand, Porsche’s profit contribution once topped the three brand clusters. However, due to lagging electrification, insufficient smart technology competitiveness, the impact of high-end new energy vehicles in China, and combined cost and policy pressures, Porsche experienced collective declines in markets outside North America, especially in China, where the decline reached 26% in 2025. Volkswagen Group summarized that the near-zero profit margin of Porsche was mainly due to “fundamental changes in the Chinese market environment.” To reverse this situation, Porsche launched a comprehensive restructuring, and the significant drop in operating profit in 2025 was also related to high restructuring costs. Porsche disclosed that it will implement a new strategy centered on “streamlining,” including significantly simplifying the product portfolio, reducing costs, and streamlining management structures.

Overall, Volkswagen Group’s business in 2025 exhibited three main features: first, overall sales volume and revenue were roughly the same as in 2024, but the sales structure had fundamentally changed; second, as the share of electric vehicles increased, profits declined significantly; third, software business still incurred losses, and cost reduction and efficiency improvement have become top priorities for Volkswagen Group.

Notably, the net cash flow from automotive operations reached €6.4 billion, which has also sparked controversy. This figure increased by 24.3% compared to 2024, indicating that despite further performance shrinkage, top executives’ multimillion-euro salaries and dividends remained unaffected. Reports from Germany indicate that Volkswagen Group’s union questioned the authenticity of this financial data and are negotiating with Volkswagen’s management board, hoping that ordinary employees can also share in the strong cash flow.

Additionally, Volkswagen Group disclosed specific data on layoffs. As of December 31, 2025, the number of employees had decreased to 662,000 from 679,000 in the same period in 2024, a reduction of 17,000. According to previous plans, Volkswagen aimed to cut 35,000 employees over five years starting in 2025. Due to profit pressures, CEO Oliver Blume announced at the earnings conference that layoffs would be expanded to 50,000, mainly involving high-end brands Audi, Porsche, and the software subsidiary Cariad.

China Market: Investment Accounting Phase Begins

The “special nature” of the Chinese market was further highlighted in 2025. Unlike the gradual increase in EV market share in Europe, Volkswagen Group adopted a “maintain oil cars while promoting electric” strategy in China. Total new energy vehicle sales in China fell 40% year-over-year, accounting for only 4.5% of Volkswagen China’s total sales, while fuel vehicles increased to a historic high of 22%. This was also the main reason why Volkswagen’s profit in China did not fall to the lowest forecast. However, compared to €1.7 billion in 2024, Volkswagen’s profit contribution from China still declined by 44%. Due to Volkswagen Group’s overall profit halving, China’s share of the total profit margin increased from less than 10% in 2024 to 10.8%.

If 2025’s “profit preservation” was a typical operation of Volkswagen’s “doing it for China,” 2026 will be a historic turning point for Volkswagen’s localization strategy in China, with over 30 billion yuan of local transformation investment entering the investment return phase.

2026 will be a key year for Volkswagen’s electrification in China, with new models competing directly with local brands. Currently, new intelligent electric models from Volkswagen and Audi are being delivered in China, and more than 20 pure electric, plug-in hybrid, and extended-range models are scheduled to launch in the Chinese market in 2026.

It is expected that these new models, developed closely with Chinese companies, will bring significant market growth but also pose a major test for Volkswagen’s profits in China. He Baichuan emphasized that “the new generation of new energy models will incorporate cost-benefit and business sustainability considerations from the start, ensuring competitive cost levels.” Volkswagen Group also mentioned in its financial report that in 2026, it will launch “more cost-effective” electric mobility products.

Volkswagen previously forecasted in its 2024 financial report that Volkswagen’s operating profit in China would bottom out in 2026, though specific figures are unknown, with a turnaround expected in 2027. He Baichuan recently stated that Volkswagen will launch more than 20 new energy models this year, which will require high-level operational management and corresponding financial support. The new product matrix will lay the foundation for Volkswagen’s performance stabilization and recovery in 2027.

Volkswagen Group also released performance expectations for 2026, predicting sales revenue growth of 0%–3% year-over-year, with an operating profit margin of 4.0%–5.5%. In the automotive sector, Volkswagen Group expects to allocate 11%–12% of investments in 2026. The net cash flow from automotive operations is projected to be between €3 billion and €6 billion, with liquidity reaching €32 billion to €34 billion. Volkswagen will continue to pursue prudent financing and liquidity management policies.

At the same time, Volkswagen Group anticipates facing multiple challenges, including macroeconomic uncertainties, international trade restrictions, tense geopolitical situations, intensifying market competition, fluctuations in commodities, energy, and exchange rates, and stricter compliance requirements related to emissions regulations. The focus of Volkswagen’s transformation will shift toward “business model adjustments, regional business layout, and cost management.”