Volkswagen abandoned its 2026 revenue growth forecast on Friday and now expects sales to fall by up to 3%, a sharp reversal that underscores the mounting pressure on European carmakers from Chinese competition and punitive tariffs. The German auto giant reported a 9.5% profit slump in the second quarter and announced it's preparing a radical restructuring that could include 100,000 job cuts — double its current redundancy programmes.
CEO Oliver Blume is pushing for the overhaul to make Volkswagen, the world's second-largest automaker, more cost-competitive. The company had previously forecast revenue growth of up to 3% this year. It maintained its operating margin forecast of 4.0% to 5.5%, an improvement on last year's 2.8%. Shares fell 3.3% in pre-market trading.
The Numbers
Volkswagen reported an operating profit of €3.5 billion ($3.98 billion) in the April-to-June period. Second-quarter revenue came in at €82.4 billion, higher than forecast, producing an operating margin of 4.2%. Analysts had expected a slight improvement on the same quarter last year, according to a poll conducted by Visible Alpha.
Blume said the group managed to offset "continued unavoidable headwinds in the double-digit billions" in the first half of 2026. "At the same time, the environment for the automotive industry remains extremely challenging," he said, pointing to geopolitical crises, trade conflicts, high regulatory requirements, volatile markets and intensified competition.
Restructuring and Factory Closures
Pending a confrontation with labour representatives, Blume has pledged to trim global production capacity and reduce the group's model lineup by up to half. The proposed restructuring includes the possible closure of four factories. The German auto group, which includes subsidiaries Porsche and Audi, delivered 6.3% fewer cars globally in the first half of the year.
The decline was driven largely by ongoing difficulties in China, where a protracted downturn in the world's largest car market has intensified competition between local brands and international automakers. Chinese competitors are increasingly looking to Europe, forcing local automakers to rush for market share.
Regional Performance
In North America, Volkswagen was able to regain some ground in the second quarter. The rollouts of entry-level electric vehicles across its VW, Skoda and Cupra brands have also boosted orders in Europe.
Why This Matters:
Volkswagen's forecast reversal is a warning signal for European manufacturing competitiveness. The company faces a triple squeeze: Chinese brands undercutting on price, tariffs raising costs, and EU regulatory requirements demanding rapid electrification without adequate infrastructure or consumer demand. The proposed 100,000 job cuts — if they go ahead — would be one of the largest workforce reductions in European automotive history. It's a stark reminder that Europe's industrial base can't compete on cost with China while carrying the burden of the continent's highest labour costs and most stringent regulatory environment. The question isn't whether European carmakers need to restructure. It's whether they can do so fast enough, and whether governments will allow the painful adjustments required to keep production in Europe rather than watching it migrate to lower-cost markets.