Volkswagen Cuts 2026 Revenue Forecast as China Sales Collapse

Volkswagen Group has lowered its 2026 sales revenue forecast after facing weaker demand in China, rising competition and continued uncertainty over global tariffs.

The German automaker now expects full-year revenue to fall by as much as 3% or remain unchanged compared with the previous year. Its earlier forecast had projected revenue growth of up to 3%.

Trade and Economic Risks Pressure Volkswagen

Volkswagen identified several challenges affecting its outlook. These include global economic uncertainty, international trade restrictions and geopolitical tensions.

The company is also dealing with stronger competition, volatile commodity and energy prices, currency fluctuations and changing emissions regulations.

Despite lowering its revenue forecast, Volkswagen maintained its operating return on sales target at between 4% and 5.5%.

Volkswagen Operating Profit Falls

Volkswagen’s operating profit declined by 11.6% during the first half of 2026.

The figure fell to €5.93 billion, compared with €6.71 billion during the same period in 2025.

The decline was partly caused by approximately €500 million in expenses connected to the decision to end U.S. production of the Volkswagen ID.4. An unfavorable product sales mix also affected profitability.

However, lower restructuring costs, currency movements and reduced fixed expenses helped offset some of the pressure.

Volkswagen’s operating return on sales decreased to 3.8% from 4.2% a year earlier.

First-Half Revenue Remains Nearly Unchanged

Volkswagen generated €158.10 billion in sales revenue during the first six months of 2026.

That represented a slight decline of 0.2% from the €158.36 billion recorded during the same period last year.

Revenue from Volkswagen Financial Services increased by 7.9%. This growth almost fully offset a 2.1% decline in the group’s automotive business.

Second-Quarter Revenue Increases

Volkswagen reported stronger revenue during the second quarter.

Sales revenue rose by 2% to €82.44 billion. However, operating profit declined by 9.5% to €3.47 billion.

The company recorded an operating return on sales of 4.2% for the quarter.

These results showed that Volkswagen continued to generate stable revenue, although higher costs and weaker vehicle sales remained a challenge.

China Sales Drop More Than 30%

Volkswagen sold 3.997 million vehicles during the first half of 2026. This was 8.4% below the 4.363 million vehicles sold a year earlier.

China was the company’s weakest major market. Vehicle sales in the country plunged by 31.6%.

Growth in other regions was not enough to offset the steep Chinese decline.

Sales increased by 5.2% in South America, 1.3% in Western Europe and 9.6% in Central and Eastern Europe. North American sales rose slightly by 0.9%, supported by improved performance during the second quarter.

Chinese Competition Intensifies

Volkswagen continues to face serious pressure in China, where local electric vehicle manufacturers are expanding rapidly.

Chief Financial Officer Arno Antlitz said the group’s 3.8% operating margin remained too low and demonstrated the need for stronger action.

He noted that China’s overall automotive market had declined by around 20%. At the same time, Chinese manufacturers were increasing exports and creating greater competitive pressure in Europe.

According to Antlitz, Volkswagen’s existing cost-cutting and restructuring plans may not be sufficient to address the changing market environment.

Automotive Cash Flow Improves

Volkswagen’s Automotive Division reported net cash flow of €3.17 billion during the first half of 2026.

This marked a major improvement from the negative cash flow of €1.4 billion recorded a year earlier.

The recovery was supported by lower tax payments, reduced working capital outflows and lower spending on fixed assets, research and development.

Net liquidity in the Automotive Division reached €32.75 billion.

CARIAD Reduces Its Operating Loss

Volkswagen’s software division, CARIAD, also delivered improved results.

Revenue increased by €250 million to €815 million, supported by software deliveries across Volkswagen’s different brand groups.

CARIAD still reported an operating loss. However, the loss narrowed to €855 million from €1.17 billion during the same period last year.

The improvement suggests that Volkswagen is making progress in reducing losses within its software operations.

Volkswagen Expects Resilient Full-Year Performance

Volkswagen Chief Executive Oliver Blume said the company expects to deliver a resilient full-year performance despite the difficult business environment.

However, the updated forecast assumes that current international tariff conditions will remain unchanged.

The guidance does not include the possible effects of a further escalation in the Middle East. It also excludes potential impacts from Volkswagen’s Group Target Picture 2030 strategy and the planned sale of a majority stake in Everllence.

The company’s performance will therefore remain closely tied to Chinese demand, international trade policies and its ability to control costs.