Europe’s biggest automaker by volume, Volkswagen, reported a 1.3 billion euro ($1.5 billion) blow to its first-half revenues, blaming the 25% U.S. tariffs on foreign-made vehicles in effect since April.
The group also cut its full-year sales and profit margin forecasts in line with other European automakers, including Renault.
At the same time, inexpensive Chinese imports into Europe are putting an extra squeeze on the continent’s legacy manufacturers now ramping up non-battery-electric-vehicle imports that are not subject to European Union tariffs.
Volkswagen now estimates its operating profit margin for this year will slip to between 4% and 5% when it had previously forecasted a range of 5.5% to 6.5%.
Chief Financial Officer Arno Antlitz, in a company statement, spells out the ongoing challenges of the U.S. auto tariffs, saying VW is being forced into realigning its business model and suggesting less of a focus on U.S. exposure.
“What really matters is cash in the bank,” he says, adding, “That’s why we must press ahead with our ongoing programs to improve earnings and pick up the pace where necessary.”
Nonetheless, CEO Oliver Blume puts a positive spin on the group’s healthy European sales performances, saying: “In Europe we expanded our leading position in electric mobility, with a market share of 28%, and order books remain well filled… we expect the positive trend to continue in second half of the year.”
