Volkswagen Posts €1.3 Billion Loss As Porsche’s EV Disaster And Trump Tariffs Deliver Double Blow

Volkswagen Group reported a €1.3 billion ($1.4 billion) operating loss for the third quarter of 2025, marking the German automaker’s first quarterly loss since the pandemic as it absorbs massive charges from Porsche’s failed electric vehicle strategy and President Trump’s punishing import tariffs. The Times reported that Europe’s biggest carmaker swung from a €2.8 billion profit in the same quarter last year to deep red ink, exceeding analyst expectations of a €1.7 billion loss.

The catastrophic results stem from a perfect storm of self-inflicted wounds and external pressures. Volkswagen booked €4.7 billion in charges during the first nine months of 2025 related to Porsche’s strategic reversal on battery-powered vehicles, while Trump’s 15% tariffs on European auto imports are expected to cost the group up to €5 billion for the full year.

Porsche’s €4.7 Billion EV Retreat Devastates Parent Company

The majority of Volkswagen’s losses trace directly to Porsche’s expensive course correction on electric vehicles. The luxury sports car maker announced in September that it would shelve plans for an all-electric SUV above the Cayenne and instead offer combustion engine and plug-in hybrid versions, while extending the life of existing gasoline models “deep into the 2030s.”

As EVXL reported last week, Porsche posted its first-ever quarterly loss of €967 million ($1.1 billion) in Q3 2025, including a €2.7 billion writedown for scrapping its battery production dreams. The sports car manufacturer announced it would “strategically reposition its battery activities and expand its product portfolio to include additional models with combustion engines and plug-in-hybrid systems” in response to weaker-than-expected global demand for battery-powered vehicles.

CFO Arno Antlitz acknowledged the brutal reality in Volkswagen’s earnings statement: “Those effects will continue to persist — and that is why we must rigorously implement the performance programs in place, push forward efficiency measures and develop new approaches.”

Trump’s Tariffs Add €5 Billion Annual Burden

Compounding Porsche’s strategic disaster, Volkswagen faces mounting costs from U.S. import tariffs that took effect in August 2025. The 15% levy on European vehicles hits Volkswagen particularly hard since the company imports roughly 240,000 vehicles annually from European factories to the United States, primarily Porsche and Audi models.

Antlitz said the company expects tariffs to cost up to €5 billion in 2025, though recent tariff adjustments offered some relief to automakers with substantial U.S. manufacturing operations. Volkswagen’s sales in the United States fell 8% this year despite the company anticipating a 10% increase, demonstrating how tariff uncertainty and higher prices are deterring American buyers.

The combined impact of Porsche’s writedowns and tariff costs resulted in total charges of €7.5 billion for Volkswagen in the nine months ending September 30, 2025, according to Reuters.

Leadership Shakeup As Blume Exits Porsche CEO Role

The financial carnage triggered a leadership change at Porsche. Volkswagen Group CEO Oliver Blume will step down from his dual role as Porsche CEO at the turn of the year, keeping only his position at the parent company. Michael Leiters, former CEO of McLaren Automotive, will take over Porsche’s top job.

Investors had increasingly questioned Blume’s ability to lead both companies simultaneously during a period of unprecedented challenges. Leiters brings deep Porsche experience, having previously served as the sports car maker’s Product Line Director before stints at Ferrari and McLaren.

Nexperia Chip Crisis Threatens Production Continuity

Adding to Volkswagen’s troubles, the company faces potential production disruptions from an escalating standoff over Dutch chipmaker Nexperia. The Netherlands government seized control of the Chinese-owned semiconductor manufacturer on September 30, 2025, citing “serious governance shortcomings” and concerns about technology transfer to China.

In retaliation, China’s Ministry of Commerce imposed export controls on October 4, blocking Nexperia from exporting components manufactured in China. The standoff threatens to halt automobile production across Europe, according to ACEA, the European automotive industry association.

Volkswagen maintained its full-year guidance but acknowledged the assumption depends on “an adequate supply of chips,” hinting at concerns about the Nexperia situation’s impact on production. Antlitz said Volkswagen is working to secure production from supply shortages “day by day and week by week.”

Financial Guidance Maintained Despite Brutal Quarter

Despite the worst quarterly performance in years, Volkswagen reaffirmed its 2025 financial guidance. The company expects an operating margin between 2% and 3% with revenue roughly matching 2024 levels. Management projects automotive division net cash flow of around zero for the full year.

The guidance assumes resolution of both tariff uncertainties and chip supply constraints—two massive assumptions given current geopolitical tensions. Volkswagen’s operating profit for the first nine months of 2025 reached €10.9 billion excluding one-time charges, representing a 4.5% margin, but that figure includes the catastrophic Q3 results.

EVXL’s Take

This earnings disaster validates everything EVXL has been saying about European automakers’ precarious position. We warned in July that Volkswagen’s profits were cratering 38% from the toxic combination of Trump tariffs and razor-thin EV margins. We documented in September how VW’s EV strategy was faltering as the company contemplated factory closures in Germany for the first time in its 87-year history.

The Porsche debacle is particularly instructive. If a luxury brand with premium pricing power, loyal customers, and motorsports heritage can’t make electric vehicles profitable, what does that tell us about Mercedes, BMW, and Audi’s similar pivots? As we noted when Porsche posted its first-ever loss, this looks like the beginning of a broader reckoning where legacy automakers admit the “race to electrification” was really a race to see who could lose the most money fastest.

The timing couldn’t be worse. Chinese EV manufacturers like BYD are eating European automakers’ lunch with rapid product development cycles and aggressive pricing. Meanwhile, Trump’s tariffs force European brands to choose between building expensive new U.S. factories or passing costs to American consumers who are already balking at high EV prices. And now the Nexperia chip crisis threatens to literally stop production lines across Europe.

Volkswagen’s assertion that 2025 represents the “trough” before improvement rings hollow. The fundamentals suggest otherwise: Chinese competition intensifying, tariffs unlikely to disappear, chip supply vulnerable to geopolitical tensions, and EV demand cooling globally. The €5 billion tariff hit isn’t temporary—it’s the new cost of doing business in America. The €4.7 billion Porsche writedown isn’t a one-time adjustment—it’s an admission that the entire luxury EV strategy was built on fantasy economics.

We’ve covered how Trump’s trade policies are upending the industry, forcing companies like Ford to raise prices e Rivian to slash 600 jobs. The difference is that Tesla and some other automakers have substantial U.S. manufacturing that shields them from the worst tariff impacts. Volkswagen Group—despite promises to build more in America—still imports the majority of its premium vehicles from Europe.

The company says it’s exploring options to reduce tariff exposure, including shifting more production across the Atlantic and potentially setting up an Audi plant in the region. But building new factories takes years and billions that Volkswagen doesn’t have while hemorrhaging cash. By the time any new U.S. capacity comes online, Chinese automakers will have advanced even further, and the competitive landscape will have shifted again.

This isn’t just a bad quarter. It’s a structural crisis for Europe’s automotive champion that exposes the impossible math of competing globally while facing Chinese efficiency, American protectionism, and the harsh reality that consumers—even wealthy ones—won’t pay massive premiums for electric vehicles that don’t deliver clear advantages over combustion alternatives.

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