EVs Drive Profit Down

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Electric Impact

In the first quarter of 2025, Volkswagen Group sold about the same number of cars as last year, with sales edging up by 1.4%, tallying up to 2.13 million vehicles delivered. Demand is roaring, up nearly 30%, fueled by revamped models from names like Porsche, Audi, and globally, Skoda. So, it sounds like a decent start to the year, right? Then, what’s causing this notable 37% plummet in profits compared to last year? Well, the electrification journey might be to blame.


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Profit Dive

Sure, more people are driving off in brand-new Porsche, Volkswagen, and Audi cars, among others from VW Group. Yet, the profits aren’t quite hitting the high notes. Earnings before and after taxes took a hit, down around 40%. The culprit? An uptick in electric vehicle sales. EV deliveries went from 9% to 19%, while orders for battery-powered vehicles surged by 64%.

Arno Antlitz, Volkswagen Group’s CFO and COO, doesn’t seem thrilled, attributing the financial squeeze to tighter profit margins on electric vehicles. The Group’s operating margin shrunk to 3.7%, a slip from last year’s 6%. Antlitz hints at strategies like maintaining a “competitive cost base,” which suggests either adjusting prices or cutting costs on the supply end. Given the talk of tariffs, adjusting on the supplier side seems more likely.

Other Challenges

Electric vehicles get a lot of the blame for falling profits, but it’s not the whole picture. Sales are slowing in the massive Chinese market, and overall output was down. Even Porsche had to cut its profit forecasts partly due to tariff worries. Plus, Volkswagen Group slimmed down its workforce by approximately 1.2% since December. All these elements combined suggest margins are just part of the VW Group’s broader profit dip.

Final Thoughts

Lesser margins per car likely explain why VW Group sold more vehicles but earned less than last year. While raising prices across brands isn’t usually a crowd-pleaser, it could become necessary. Notably, if making money from electric cars remains challenging, why just roll out nearly production-ready electric models for China, with plans for about 30 models in upcoming years? It seems this might not be the last time we hear about profit declines in the VW Group.

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