Volkswagen: CEO’s pay rises while profits fall

Volkswagen’s profit dwindled by one-third last year due to slow demand and a cooldown in the Chinese market. But the salary of its CEO, Oliver Blume, rose. Will the near future relieve the ongoing problems at the German car giant?

Volkswagen’s net profit plummeted 30.6% in 2024 to €12.39 billion. Europe’s largest automaker grapples with slowing demand, rising costs, and intensified competition from Chinese manufacturers.

The German automaker, undergoing extensive restructuring to regain its old form, announced an unprecedented cost-cutting plan earlier this year, including eliminating 35,000 jobs in Germany by 2030.

Chinese threat

After three years of record profits, like its German peers, Volkswagen is struggling with market downturns and mounting operational expenses, particularly in energy and electrification. The Wolfsburg-based group, which oversees brands like VW, Porsche, Skoda, and Audi, saw a 2.3% decline in vehicle deliveries in 2024. 

While sales in North America grew by 6.4%, they fell by 9.5% in China, a market that accounts for nearly a third of Volkswagen’s global sales. This erosion underscores the growing threat from Chinese EV makers, which are increasingly dominating the sector.

The ongoing slump in China has significantly impacted Volkswagen’s luxury brands, including Porsche and Lamborghini, while Western dealerships, including those under Audi, have struggled to maintain sales.

Also, Volkswagen’s restructuring efforts increased fixed costs (amounting to €2.6 billion), contributing to a decline in its operating margin, which fell to 5.9%, down from 7% in 2023 and 7.9% in 2022. Still, the margin exceeded internal forecasts (5.6%).

Dipping EV sales

A significant concern for Volkswagen is the flagging performance of its electric vehicle department. After a decade of continuous growth, EV registrations dipped by 3.4% last year, with their share of total sales stagnating at 8.3%.

This is well below the automaker’s target of reaching 80% EV sales by 2030. Volkswagen hopes to reinvigorate demand with upcoming affordable EV models, including the ID.2 in 2026 and the ID.EVERY1 in 2027.

Challenges extend beyond market dynamics as geopolitical and trade tensions are looming. Volkswagen closely monitors potential risks stemming from protectionist policies, like the temporarily paused US tariffs on Mexican imports, where the company manufactures some key models. Additional tariffs on European-made vehicles could further exacerbate these concerns.

Light in the tunnel?

Financially, Volkswagen is bracing for another challenging year. Nevertheless, the carmaker projects a 5% increase in revenue for 2025 and aims for an operating margin between 5.5% and 6.5%. During the earnings call, CFO Arno Antlitz was cautious, admitting that the company remains dissatisfied with its financial outlook.

He added that his forecast did not include damaging effects from import tariffs and that he expects the Trump administration to give the carmaker some slack as it invests in its Chattanooga plant and revive the Scout brand.

Volkswagen received some relief from the European Union to help it overcome the hurdles. Its recent decision to delay stricter CO2 emission regulations until 2027 unwinds the threat of a billion-dollar fine for exceeding emission thresholds. Volkswagen has offered the European administration to help increase military capacity, though it is unclear whether in a consultancy or assembly role. 

Finally, positive figures were reserved for CEO Oliver Blume. The VW Group CEO, who also heads Porsche, saw his total compensation increase by 6.5% last year to €10.3 million, reflecting a combination of fixed salary and performance-based incentives. However, he and other top executives agreed to a 5% reduction in their base salary for 2024 as part of cost-control measures.