Volkswagen Cuts 2026 Revenue Outlook as China Weakness, Trade Risks Weigh

Volkswagen Group lowered its 2026 sales revenue forecast on Friday, citing a challenging global business environment marked by weak demand in China, trade uncertainty, geopolitical tensions, and rising competitive pressure.

The German automaker now expects 2026 sales revenue to range from a 3% decline to flat compared with the previous year, a downgrade from its earlier outlook of flat to 3% growth. Despite the weaker revenue forecast, Volkswagen maintained its operating return on sales guidance at 4.0% to 5.5%.

During the first half of 2026, Volkswagen’s operating profit fell 11.6% year over year to €5.93 billion from €6.71 billion. The decline was largely driven by roughly €500 million in costs tied to the discontinuation of U.S. production of the ID.4 electric vehicle, along with an unfavorable sales mix. Lower restructuring costs, favorable exchange rates, and reduced fixed expenses partially offset the impact. The operating margin slipped to 3.8% from 4.2% a year earlier.

Group revenue remained largely stable at €158.10 billion, down just 0.2% from the same period in 2025. Stronger Financial Services revenue, which climbed 7.9%, nearly compensated for a 2.1% decline in automotive sales. Second-quarter revenue increased 2% to €82.44 billion, although operating profit dropped 9.5% to €3.47 billion.

Vehicle deliveries declined 8.4% to 3.997 million units in the first half. Growth across South America, Western Europe, Central and Eastern Europe, and a modest increase in North America was outweighed by a sharp 31.6% decline in China, highlighting the growing challenge from domestic Chinese automakers.

Volkswagen’s Automotive Division generated net cash flow of €3.17 billion, a significant improvement from a €1.4 billion outflow a year earlier, while net liquidity reached €32.75 billion. Meanwhile, software subsidiary CARIAD increased revenue to €815 million and narrowed its operating loss to €855 million.

CEO Oliver Blume said Volkswagen still expects to deliver a stronger full-year performance than in 2025 despite ongoing headwinds. CFO Arno Antlitz acknowledged that the current 3.8% operating margin remains too low, warning that weaker Chinese demand and intensifying competition from Chinese vehicle exports to Europe require stronger cost-cutting and efficiency measures. Volkswagen added that its outlook assumes current global tariff conditions remain unchanged and excludes any impact from further Middle East escalation, the Group Target Picture 2030 strategy, or the planned sale of a majority stake in Everllence.