Volkswagen cuts 2026 operating margin forecast to 1% after €6 billion Porsche write-down

Drastic cut to operating margin outlook

Volkswagen Group lowered its financial forecast for the 2026 fiscal year on Friday, projecting that operating return on sales will reach at most 1%. The Wolfsburg-based automaker had previously anticipated an operating margin between 4.0% and 5.5%, after reporting a margin of 2.8% in 2025. Group revenue for 2026 is now expected to stand at approximately €315 billion, which sits in the middle of its earlier forecast band but represents a decline of roughly €7 billion compared to the €321.9 billion achieved in the previous year. Adjusted for one-off charges, the group's operating margin would reach around 4%, which Chief Financial Officer Arno Antlitz identified as the bottom end of the original forecast corridor. Antlitz stated that this adjusted level remains insufficient to fund required future corporate investments.

In a difficult economic environment, we are working intensively to position the Volkswagen Group for the future. But now several effects have come together.

Ten billion euros in special burdens

The forecast revision stems from approximately €10 billion in extraordinary burdens expected across the 2026 financial year, of which €900 million was recorded during the first six months. The primary item is a non-cash write-down of €6 billion on the book value of Volkswagen's equity stake in sports car subsidiary Porsche AG. Porsche recently revised its medium- and long-term business planning, lowering its valuation expectations by 10% to 15% due to slowing sales and elevated investments. In addition to the Porsche impairment, Volkswagen faces €2 billion in write-downs across other units, including fully consolidated Chinese operating entities, as well as €2 billion in other operational and restructuring expenses. Volkswagen expects to book the majority of these special charges in the third quarter of 2026.

Market slump in China and EV transition

Volkswagen attributed the operational downturn to worsening conditions in key markets, most notably across China, where total vehicle sales contracted by 20%. The automaker operates primarily as a conventional combustion engine provider in China, where consumer preferences have shifted rapidly toward electric mobility. Competitive pressure has intensified as Chinese manufacturers accelerate exports of low-priced electric models to Europe. Furthermore, rising European demand for battery-electric vehicles, accelerated by higher fuel prices and geopolitical instability following the outbreak of the Iran war, has dampened profitability. Electric vehicles generate lower operating margins than combustion models due to high battery production costs, weakening earnings at both the Volkswagen passenger cars and Audi brands.

The largest single market in the world has collapsed by 20 percent, and at the same time Chinese manufacturers are pushing into Europe with their low-cost exports.

Share price reaction and restructuring plans

Volkswagen shares declined up to 7.5% intraday, marking their steepest single-day drop since 2022, before finishing 5.6% lower at €76.52 as the largest decliner on Germany's DAX index. The announcement occurred on the same day Volkswagen shares were removed from the Euro Stoxx 50 index. Family holding company Porsche SE also reduced its 2026 group earnings forecast by €2 billion, establishing a revised range between minus €0.5 billion and plus €1.5 billion. Volkswagen is executing cost-cutting programs agreed with labour representatives in late 2024, which mandate the reduction of 50,000 jobs in Germany by 2030, including 35,000 at the main Volkswagen brand, alongside the planned sale of its Osnabrück production facility. Porsche CEO Michael Leiters is preparing thousands of job cuts at the sports car maker, which will detail its medium-term targets during a capital markets day on 7 October.