Extra tariffs on European cars, as well as unfavourable currency exchange rates, have resulted in Volkswagen Group's operating result dropping by nearly a third in 2025.
Despite selling slightly more cars globally in the first six months of this year compared to 2024, Volkswagen Group's operating result is down 32.8 per cent, from €10 billion ($AU17.55 billion) to €6.7 billion ($AU11.88 billion).
The decrease of €3.3 billion ($AU5.84 billion) is largely attributed to new US-imposed tariffs rolled out earlier this year, CO2 fleet regulations in the US and Europe, and fluctuations in exchange rates, according to VW Group's half-yearly financial report.
VW Group stated that “in total, the additional tariffs imposed by the USA resulted in a reduction in the operating result of €1.3 billion (AU$2.3 billion) in the first half of 2025”.
In April, the US imposed a 25 per cent tariff on vehicles, and additional tariffs on parts in May, amounting to 27.5 per cent.
Volkswagen Group brands in the US have reportedly started passing some of these increased costs to consumers by raising sticker prices on cars, but it is unclear if the marques are asking buyers to pay the full tariff increase.
According to US publication NPR, car makers are absorbing some of the cost of the US tariffs, and that not all increases “have not been passed along to consumers” so far.
VW Group said in their financial statement: “Investors were initially hopeful that the protectionist measures announced by the US government would not materialise.
“The severe tariff hikes announced by the USA in early April 2025 led to great uncertainty on the capital market, causing share prices to tumble,” the report said.
The US has since struck a deal with Japan on lower tariffs, and car brands are hoping the same will be met with Europe.
The car-making conglomerate is not alone in its loss of profit margin due to changes in the key US market, as another European brand, Jaguar Land Rover, imposed job cuts after its US sales dipped.
Despite these challenges, Volkswagen Group sales worldwide have actually increased this year, up 0.5 per cent from 4,341,000 units to 4,363,000, excluding Chinese joint-venture figures.
In terms of regional breakdown, Volkswagen Group sales are up this year compared to 2024 in the two largest car markets of the US and China.
As a result, revenue so far in 2025 is also in line with the first six months of last year, down just 0.3 per cent to €158.4 billion ($AU280.39 billion).
However, the strengthening US dollar and Chinese yen against the Euro is also eating away at VW Group's bottom line, as is the cost of sales increasing faster than sales revenue this year.
VW has anticipated the overall economic output growth in 2025 to be at a “slightly slower pace than 2024”.
Ilana is a Melbourne-based journalist who was previously a copywriter in the Big Apple. Having moved to Melbourne for her Master of Journalism, she has written articles about food, farm machinery, fashion, and now the fast and furious. Her dream car has been a Mini Cooper since the fifth grade, eyeing its style and petite size.
