Volkswagen expects strong profits despite Europe’s tariff challenges

Volkswagen waiting for profits and sales to remain the same in 2025 do not sound very exciting, but while existential problems are assembled some investors can see this as extremely bold.

After all, sales in Europe appear to be stagnant, while electric vehicles still sit in foreword for long as buyers hope to return government stimuli. One last EV Plus point for VW was the decision of the European Union, waiting for ratification, to ease the rules for CO2 emissions in 2025 by extending them for an additional two years. VW was seen as the main beneficiary of this concession with analysts waiting for a 1.5 billion euro ($ 1.6 billion) hit income before the EU Commission’s decision.

China’s competition versus VW in Europe will continue to grow higher, while its once frightening profits in China will fall again. VW has been hit by the tariff dispute between SH.BA, Mexico and Canada. But the biggest threat to VW is from President Donald Trump’s plan to rationalize his tariff regime with Europe.

Trump has described the EU trade policy as “a cruelty”. He will discover his plans on April 2 and has already said that vehicle tariffs will increase to 25%. Barriers. The talks are likely to be extended.

VW said on Tuesday that it expects its operating profit margin to increase between 5.5% and 6.5% in 2025 compared to 5.9% in 2024. Sales will increase by up to 5%. In 2024, VW sales income increased 0.7% while global sales fell 2.3%. VW 2024 operating profit fell 15% to € 19.1 billion (20.9 billion dollars) for sales of € 324 billion ($ 354 billion).

VW leading financial officer Arno Antlitz said the perspective reflects profound changes affecting the vehicle industry, but does not try to include the potential impact of trade tariffs on Imports on the US from Mexico or Europe.

Frank Schwope, lecturer in the automotive industry at the University of Applied Sciences FHM Hannover, said VW profits had grown artificially during the coronavirus years that had caused Chip. This had reduced the overall production, but allowed VW, and other automobiles, to make more money by shortening sales of free vehicles, with low margin and selling higher high -profit vehicles.

“With the results for 2024, Volkswagen has approached a little closer to reality,” Schwope said in an email.

“These high coronavirus borders have recently been used as a landmark by management boards in industry. However, it is clear – as is the case with stellantis, for example – that these expectations were exaggerated and that coronavirus profits cannot be extrapolated,” Schwope said.

VW, responding to the conditions of strengthening in car markets, has tried to reduce costs and reform its counter-productive, politicized corporate structure.

He had sought to close three German factories, but at the end of last year the union leaders announced negotiations with a “miracle of Christmas” because there would be no immediate closure of the factory, vacation from vacation or pay cuts. Volkswagen eventually announced more than 35,000 job discounts and a reduction in capacity of more than 700,000 vehicles. VW agreed to keep 10 German factories running and maintaining work by 2030 and planning to make 15 billion euros ($ 15.6 billion) in efficiency profits.

Orwa Mohamad, Analyst in Minneapolis, a Minnesota Bridge Bridge -based investment researcher, said bigger changes are required.

“High job costs, outdated processes and excessive complexity in its brands all contribute to its financial strain. Without addressing these broader inefficients, simply reducing factory tracks will not be enough to restore competition, ”Mohamad said in an email.

China’s weakening profits of VW are a concern. Its efforts to simplify operations have been slow, with many models, many changes, and Volkswagen’s target for a 9% operating difference by 2030 is unrealistic if it does not make deep structural changes, he said.

“The Volkswagen Union remains a powerful force in the formation of the company’s future. With a significant impact on decision making, it has already been pushed against drastic cost reduction measures,” Mohamad said.

FHM Hannover’s Schwope was expecting more problems to be mounted for VW, but it was sure it would be a match for them.

“The head of the head inside and from China, the policies of the new US government, the EU customs policy and, in particular, the disruption will put the industry under massive pressure in the coming years. After electromobility disruption, the second phase of decay is due to the end of the decade: autonomous driving,” Schwope said.

“The Volkswagen group will remain a permanent construction site for the coming years, but it has always shown that it is adaptable over the past decades. After all, the group is still the second largest car manufacturer in the world and is one of the five largest EV manufacturers,” Schwope said.