German Media: Is Volkswagen's Crisis Intensifying? After a Sharp Profit Drop, the Company Shifts Toward Defense Industry and Plans to Sell China-Specific Models to Europe
The European largest automaker, Volkswagen Group, has plunged into crisis at the beginning of 2026. Latest financial reports show that after-tax profit in the first quarter dropped sharply by 28.4% year-on-year to €1.56 billion. CEO Oliver Blume is attempting to reverse the downturn through fundamental changes to its business model. Volkswagen plans a comprehensive restructuring of its operations, including significantly reducing the number of existing vehicle models, evaluating the potential introduction of China-developed special-market vehicles into Europe, and engaging in deep cooperation with the defense industry.
Data released by Volkswagen Group on Friday, May 1st, indicates the company is facing serious financial challenges. From January to March this year, the group’s after-tax profit amounted to only €1.56 billion, a significant decline from €2.19 billion during the same period last year. In 2025, the group had already suffered a 44% hit to its profits. CEO Oliver Blume pointed out that war, geopolitical tensions, trade barriers, and fierce competition are creating powerful external headwinds.
"China-Specific Models" and a New Pathway into the Defense Industry
To improve capacity utilization at European factories, Blume stated that the company is considering introducing vehicles developed specifically for the Chinese market into European markets. He noted that Volkswagen will assess whether new models originally planned for release in China have sales potential in Europe, but this remains at the stage of proposal review and no concrete agreements have been made yet.
Meanwhile, Volkswagen is seeking new opportunities in the defense sector—particularly concerning the Osnabrück plant, which faces impending model phase-outs. Blume confirmed that Volkswagen is engaged in “in-depth and constructive” negotiations with the defense industry. Although Blume ruled out direct weapons production, he emphasized the company is considering manufacturing military transport vehicles. If the Osnabrück model proves viable, other plants such as Zwickau, currently facing excess capacity, may follow suit in the future. Reports suggest Volkswagen might collaborate with Israel’s Rafael Advanced Defense Systems on components for air defense systems, but Blume declined to comment on this.
The "2030 Strategy" and Mounting Cost Pressures
Faced with an increasingly harsh global trade environment since 2024, Volkswagen believes its current cost-saving measures are insufficient. CFO Arno Antlitz revealed that tariffs imposed by the United States alone add approximately €400 million in annual burden to the group, with tariff expenses already reaching €600 million in the first quarter. Additionally, due to halting electric ID.4 production in the U.S. and shifting back to internal combustion engine vehicles, Volkswagen incurred an extra €500 million in costs.
According to the latest development plan, Volkswagen will undertake a large-scale simplification of its product portfolio. Blume announced that the company intends to cut at least 10% of the approximately 150 vehicle models and variants across the entire group. On the capacity front, in addition to previously planned reductions of 1 million units by 2028, Volkswagen plans to further reduce capacity by 500,000 units in Europe by 2030. Antlitz emphasized that as competitive pressures continue to intensify, Volkswagen must drive structural reforms to ensure future profitability and financing capability.
Source: dpa, DW
Original article: toutiao.com/article/1864096906242060/
Disclaimer: The views expressed in this article are those of the author.