Volkswagen and Audi have been particularly hard hit in the Chinese market

Germany – Volkswagen, the German automotive giant, warned on Friday that its annual profit would shrink by 10 billion euros (approximately 11.4 billion U.S. dollars) due to a challenging market environment in China, difficulties faced by its subsidiary Porsche, and costs associated with restructuring. The company is advancing the largest workforce reduction plan in the global auto industry and said it expects its profit margin in 2026 to be only 1%, down from its previous forecast range of 4% to 5.5%.

Like its peers, Volkswagen faces mounting cost pressures from the transition to electric vehicles, as well as declining demand and intense competition in China, the world’s largest automobile market. The group, which operates 10 brands, stated on Friday that the Volkswagen and Audi brands have been especially affected in the Chinese market.

Arno Antlitz, Volkswagen’s chief financial officer, said in an interview posted on the company’s internal network: “The global market situation continues to deteriorate, particularly in China.” He added: “While demand for battery-electric vehicles has accelerated due to geopolitical tensions and soaring oil prices, we are currently generating far less profit from electric vehicles than from internal combustion engine vehicles.”

Volkswagen also announced a write-down of 600 million euros on Porsche’s value, citing more conservative expectations regarding the performance of the sports car manufacturer going forward.

——Sharp Sales Decline ——

Porsche’s sales in China have declined sharply. Its electric models lack the powerful acceleration associated with traditional combustion engines, making them less appealing to consumers, which has led to high costs from strategic adjustments.

This write-down marks the second in Volkswagen’s fiscal year. In September last year, the luxury automaker revised its product portfolio, scaled back investment in electric vehicles, and lowered its profit targets, prompting Volkswagen to record a 5.1-billion-euro impairment charge.

Volkswagen announced on Friday it will incur a 2-billion-euro charge related to asset write-downs in China, the sale of a plant in northern Germany, and an expanded early retirement program.

Earlier this month, Volkswagen said it would sell its factory in Osnabrück, in northwestern Germany, to an Israeli investor and the state government of Lower Saxony—the company’s main shareholder—and plans to partner with Israel’s Rafael Advanced Defense Systems on a missile defense project.

The automaker also revised downward its full-year sales outlook, now expecting revenue to decline slightly to around 315 billion euros, down from its earlier projection of flat or up to a 3% decrease.

Following the announcement, Volkswagen’s share price dropped 7.5%. Shares of other German automakers, Mercedes-Benz and BMW, also fell by more than 5%. Earlier this month, Volkswagen reached an agreement with labor unions to cut up to 100,000 jobs by 2030—50,000 more than previously projected by the group.

On Monday, unions organized nationwide protests, staging demonstrations outside automobile manufacturers and their suppliers, calling for stronger measures to support the struggling industry.

Original: toutiao.com/article/1876711552452608/

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