Most people have heard about VW cars, starting with the classic VW Beetle. Corporately VW is owned by Porsche and includes brands such as Audi, Skoda and Seat. If you are in Germany, it is hard not to see a VW product, and with its classic German engineering, the carmaker is a major player in the two biggest car markets of the world – the US and China.
In an article from Reuters, the world’s second largest car maker is being hit by a perfect storm. Its Porsche division wrote off $16 billion. In the US, the administration has imposed tariffs or increased prices on imported vehicles. In China, the EV push by the Chinese government, as well as every year Chinese brands are better, means the demand for foreign luxury brands is falling. The Porsche division posted a profit margin of 1.1% in 2025.
The issue with Porsche compounds the problem with VW as that division recently announced it was cutting 50,000 jobs, simplify its structure and likely plant closures.
New midterm assumptions for Porsche, of which VW owns 75.4%, led to write downs of $9.6 billion.
Finance chief Arno Antlitz wrote a memo which said we have no time to lose, citing a 20% contraction in China, which is the world’s largest car market.
VW group had expected profit margins of 4 to 5.5% margins, now believes a good year will be 1% profit margin.
Linking to dividend paying stocks, when we see change in the world, things can change quickly even though the companies are seemingly doing the correct thing. VW was the world’s second largest car maker and things were going well from the plants to executive suite, now VW will still sell a lot of vehicles it just that profit margins are very thin and not expecting to rise in the near term. The good news if you own shares directly, there is hope for the company, the bad news is the world’s biggest car market (China) is going rapidly to EVs and VW is not a major player. It has the ability to buy into a Chinese EV company or there will be mergers in the future, your capital is safe, the company will be different.
There are more questions than answers, till the next time – to raising questions.
