Volkswagen is flying into the abyss — Financial Times

Volkswagen Group is facing an unprecedented crisis. The financial report for the third quarter of 2026 showed a record operating loss, a collapse in sales in the key Chinese market and forced restructuring, which could lead to the closure of some German factories. The concern was caught between US tariff pressure, a price war in China and an expensive transition to electric vehicles. This is reported by the Financial Times.

Record loss: figures and reasons

According to the results of the third quarter (July-September), Volkswagen's operating loss amounted to € 5.86 billion, whereas a year earlier it amounted to € 1.3 billion. Analysts had expected a much more modest figure — about 2.6 billion euros. Revenue decreased by 6.3% to € 75.3 billion, and net profit after tax went down by € 5.82 billion.

The key blow to the financial result was caused by one-time write-offs totaling about € 8.7 billion over nine months, of which almost € 8 billion fell precisely in the third quarter. The main part is the impairment of Porsche goodwill by € 6.4 billion. The reason is a decrease in expectations from the future results of the sports brand, which was previously the main "pearl" of the concern. Another € 1 billion was made up of write-offs of assets in China and expenses related to the planned sale of the Osnabrück plant.

Even without taking into account one-time factors, the operating margin for nine months was only 3.8%. Finance Director Arno Antlitz admitted:

"This is not enough to continue investing vigorously in our future."

China: "free fall"

The main operational challenge is the critical situation in the largest market. The group's deliveries in China for nine months fell by 30.2% to 1.38 million vehicles, and in the third quarter the decline accelerated to 38.5%. In the segment of electric vehicles, the decline is even deeper — 42.5%.

The head of the Chinese division, Ralph Brandstetter, described the situation as a "state of free fall." The sales forecast for 2026 is less than 19 million cars against 24 million a year earlier. By 2030, Volkswagen expects sales in China at 2.2 million cars per year instead of the planned 3.2 million.

The concern has already reduced production capacity in China by more than 1 million vehicles and reduced staff from 90 to less than 70 thousand people. It is planned to further reduce capacity by another 500 thousand cars. The reason is not only a drop in demand, but also fierce competition with local electric vehicle manufacturers, who are winning the price war.

Germany: factories under threat, cuts are inevitable

The crisis directly hit the German sites. Due to falling demand in Europe (the market has shrunk from 16 to 14 million cars), the concern has excess capacity of about 500 thousand cars. According to Antlitz, for four plants in Germany — Emden, Zwickau, Hanover and Neckarsulm — "from today's point of view there is no subsequent loading." Their phased closure is planned in the period from 2031 to 2034.

The restructuring program provides for the reduction of up to 100,000 jobs worldwide, with about half coming from Germany. The IG Metall trade union is already preparing for tough negotiations, and strikes are not excluded from January 2027.

Why this is happening: three pressure fronts

CFO Antlitz identified three main causes of the crisis:

• US tariffs: for nine months Volkswagen has paid about € 2.2 billion in direct duties, and by the end of the year about € 3 billion is expected. The total damage from tariffs, including lost profits, is estimated at € 4-5 billion.;
• Compression of the Chinese market: the decline in sales of cars with internal combustion engines, where Volkswagen is historically strong, is happening faster than sales of electric vehicles are growing;
• Electric cars are less profitable: the share of electric cars is growing (in Europe, orders for them have increased by 39%), but the concern is still able to make money on them worse than on cars with an internal combustion engine.

Rebalancing in favor of the United States

The strategy for overcoming the crisis, outlined by the leadership, involves strengthening production in the United States. Antlitz stated bluntly:

"We need stronger production in America so that the concern becomes more stable and less dependent on geopolitics."

The issue of building Audi's own plant in the USA is being considered, as well as reorientation to more profitable segments — pickups and large SUVs.

The forecast for the whole of 2026 has already been revised down sharply: revenue of about € 315 billion is expected and operating profitability is not higher than 1% (previously planned 4-5.5%).

The shareholders of the concern do not lose hope for better times, stating that Volkswagen is not "disappearing" and is not "hiding" in Germany — it is undergoing a painful transformation caused by structural shifts in the global auto industry. But the scale of losses and the rate of decline in China are such that this quarter was the most alarming signal for the concern in recent years.