Frankfurt (Germany) (AFP) – Volkswagen said Friday that its net profit plunged in the second quarter as the crisis-hit carmaker, weighing up to 100,000 job cuts worldwide, grapples with increasing competition in and from China. Net profit for the three months to the end of June came in at 1.54 billion euros ($1.75 billion), the 10-brand group said, a fall of 32.9 percent on the same period last year. Last year’s figure was itself a decline of almost 37 percent on 2024.
The result was hit by a 500-million-euro charge the carmaker booked for stopping US production of its electric ID.4, Volkswagen said, as well as “negative mix effects,” meaning the automotive giant sold more lower-margin products. The firm, which in addition to its own brand also includes the likes of Lamborghini, Audi, Skoda, and Porsche, also cut its guidance for the year and said it now saw sales flat or falling up to three percent. It previously expected growth of up to three percent.
The results pile pressure on the beleaguered group, which has been suffering from slimmer margins from the sales of electric cars, US tariffs, and above all intense Chinese competition. “We must accelerate efforts to structurally lower our cost base and sustainably improve our earnings quality,” Volkswagen finance chief Arno Antlitz said. “What matters now is swift and consistent implementation.”
Like other German carmakers, Volkswagen has suffered from years of declining sales in China, the world’s largest market, weighed down by fierce competition from local rivals as well as muted demand given China’s slow domestic economy. Volkswagen’s vehicle deliveries in the country were last year already at their lowest level since 2011, and they fell a further 31.6 percent in the first six months of the year, the firm said.
Pressure to cut costs has intensified as Chinese brands have sought to export their way out of cut-throat competition at home, threatening European carmakers on their home turf. Brands including BYD, Geely, and Chery took almost 11 percent of the European car market in May, according to automotive intelligence firm Dataforce, up from just under three percent three years ago.
Volkswagen CEO Oliver Blume told staff earlier this month that four plants could close and a further 50,000 jobs might have to go on top of the 50,000 departures that have already been agreed across the group. If the restructuring goes ahead, it would be the largest in the history of the automotive industry, eclipsing the 50,000 job cuts General Motors made after it declared bankruptcy in 2009.
Any overhaul is likely to be hard fought. Labour representatives and the German state of Lower Saxony, who both take a dim view of plant closures, together hold more than half the seats on the supervisory board. Lower Saxony is a shareholder in the Volkswagen Group and holds 20 percent of the voting rights in addition to hosting six Volkswagen plants. Talk in 2024 of possible plant closures resulted in an agreement with unions that ruled out factories closing and compulsory redundancies until 2030 as part of a deal that would see 35,000 jobs go at the Volkswagen brand in Germany by the end of the decade.
© 2024 AFP
