Volkswagen’s earnings dropped last year and its profitability may improve only marginally this year, as the automaker repositions its global business to deal with shifting trade policies in the United States and tough competition from its Chinese rivals.
Volkswagen is Europe’s largest carmaker, and its reach extends across the globe. While the company’s size and scale served it well for decades, in recent years they have become a headache, especially since President Trump upended global trade practices by threatening tariffs against America’s largest trading partners.
Volkswagen said on Tuesday that its revenue was flat while operating profit fell 15 percent in 2024, citing “a significant increase in fixed costs” linked to restructuring. For this year, the company expects its operating profit margin to be in a range of 5.5 to 6.5 percent, roughly the same as the 5.9 percent margin it recorded last year.
“Our outlook reflects the global economic challenges and the profound changes that are happening in the industry,” said Arno Antlitz, chief financial officer of Volkswagen. Among the challenges, he said, were “an environment of political uncertainty, expanding trade restrictions and geopolitical tensions.”
The company’s restructuring costs included nearly $1 billion for a severance pay program linked to the administrative division of the Volkswagen brand. The company also reached an agreement last year with the IG Metall union that included plans to cut 35,000 jobs through retirement and attrition, but without any immediate closures of the company’s 10 factories in Germany.
An Audi factory in Brussels closed its doors at the end of February, a decision that cost the company the equivalent of $1.75 billion that was written off last year. The plant, like those in Germany, was struggling with high labor and structural costs.
Volkswagen is shifting its production in Europe to Spain and Portugal, where energy and labor costs are significantly lower. A battery cell factory is planned in Valencia, and the automaker’s new, entry-level electric model will be produced at a plant in Palmela.
In the United States, Volkswagen has pinned its hopes on the revival of the Scout brand, which the company is betting will compete in the lucrative pickup truck market. It will include an all-electric model and another fitted with both a battery and a small combustion engine, known as a range extender.
Despite efforts by the Trump administration to eliminate subsidies and tax breaks for electric cars, Volkswagen said that it remained committed to battery technology in all of its markets and that it expected demand for battery-powered cars to increase in 2025.
Volkswagen faces the threat of U.S. tariffs, which Mr. Trump has said he plans to impose on imports from Europe as well as Canada and Mexico. In addition to its assembly plant in Chattanooga, Tenn., Volkswagen has a plant in Puebla, Mexico, and is building a battery cell factory in Canada.
Oliver Blume, chief executive of Volkswagen, said he was waiting until a concrete tariff strategy emerged from Washington and government officials in Brussels and Berlin staked out their positions before the company would begin talking with the Trump administration.
“We will take up talks when the general framework is clear,” Mr. Blume said.
Pointing to the pushback from U.S. automakers that led Mr. Trump to pause tariffs on cars and car parts from Canada and Mexico, Mr. Antlitz indicated that Volkswagen was also hopeful a resolution could be reached that reflected the complexity of the cross-border automobile industry in North America.
“In the auto industry, you can’t just localize a vehicle overnight,” he said. “We will have to see what will happen.”
Later that day, Mr. Trump escalated his fight with Canada, saying he would double tariffs on steel and aluminum imports and put tariffs on Canadian car imports so high that they would “permanently shut down the automobile manufacturing business in Canada.”
In China, another key market for Volkswagen, the German carmaker is struggling to compete with local competitors that have been quicker to tailor their offerings to customers who prize engaging software and entertainment in their cars. Volkswagen is expecting to see losses of up to 1 billion euros ($1.1 billion) in China this year, Mr. Antlitz said.
Last year, Volkswagen set up a joint venture with the Chinese carmaker XPeng, as part of its “in China for China” strategy, which it hopes will help it to claw back market share lost to competitors like BYD and Xiaomi.
