The VW Group is struggling and sees its only long-term rescue in the further development of its Chinese activities /Volkswagen
Volkswagen posted its steepest quarterly loss in more than a decade in the third quarter, hit by a writedown on its stake in Porsche and weakness in China, adding urgency to the automaker’s sweeping restructuring plan.
The world’s second-largest carmaker reported an operating loss of €5.9 billion for July to September 2026, prompting management to renew calls for radical cost cuts as a fight with German unions looms.
Driven by €8 billion in one-off charges, the loss was Volkswagen’s largest quarterly deficit since the fourth quarter of 2015, when the group booked hefty costs linked to the ‘Dieselgate’ emissions-cheating scandal.
Since the beginning of the year, VW Group has booked over €9 billion in exceptional charges, mainly in the third quarter, including €6.4 billion in depreciation of its Porsche jewel, driven by difficulties in the Chinese market, and restructuring costs.
In mid-September, VW Group lowered its forecast, now projecting a minimal profit margin of 1% versus 4 to 5% at the start of the year. CFO Arno Atnlitz underlined that even before the write-downs the operational margin was only 3.8% over 9 months and that “it was time to (re)act”.
Restructuring
Volkswagen is grappling with shrinking margins as Chinese electric-vehicle makers gain significant market share in Europe after ending the group’s dominance in China, highlighting mounting pressure on European automakers.
“We must fundamentally reshape our business model,” CFO Arno Antlitz said while presenting the results. He added that Volkswagen’s restructuring plan, agreed by the board in September and involving 100,000 job cuts across the group and the closure of up to four plants in Germany, must be implemented quickly. Our financial performance leaves no room for delay,” he added.
Volkswagen’s restructuring has been driven largely by the decline of its once highly profitable China business, where the group is also cutting jobs and capacity. Chinese consumers have increasingly shifted to domestic brands offering advanced technology at lower prices, prompting, for example, Porsche to scale back its presence in the market. Volkswagen is meanwhile increasing exports from China to offset slowing local demand.
Its Anhui venture is currently loss-making, with management targeting a return to at least break-even by 2030, Antlitz said.
China’s weak domestic market has also pushed local manufacturers into Europe to find growth, forcing Volkswagen to accelerate the rollout of lower-cost EVs to defend market share. That effort is weighing on margins because EVs are still more expensive to produce than combustion engine vehicles.
Moritz Kronenberger of Union Investment told Reuters that further measures could be necessary. “If business in China and the competitive landscape vis-à-vis Chinese competitors in other markets do not improve soon, there will continue to be significant potential for write-downs in the future,” Kronenberger said.
The China case: problem and solution?
Beyond the restructuring and 100,000 job layoffs, Volkswagen wants to cut its model portfolio by half, reduce production capacity, and restrain investments to achieve €31 billion in cost savings by 2030. In contrast, the group still has high hopes and plans for China, especially for its international development.
It announced it will produce 300,000 cars annually in China for export to Asia, the Middle East, and South America. And not to Europe? “For the moment, we’re not thinking about that,” said Ralf Branstätter, VW’s China Director.
For the moment, the Chinese market isn’t going well for Volkswagen. In Q3, it sold 405,800 cars in China, a 38.5% decline, resulting in a €1 billion depreciation of the assets. The three joint ventures Volkswagen is tied to (with SAIC, FAW, and JAC) have registered a €113 million loss in Q3.
Nevertheless, Volkswagen is changing its strategy and calls it “In China for the entire world”. “What we develop in China will make Volkswagen more competitive worldwide,” says Brandstätter, because “the technologies developed in China are a major strategic asset for the group and the motor of innovation.”
The spokesman for Group CEO Oliver Blume has confirmed this: “Creating and developing cars in Germany and producing them in Europe for export all over the world is not working anymore for all our brands.”
The Chinese market is seeing a sharp decline in sales, and all manufacturers are suffering, but European ones the most. The Chinese manufacturers are compensating for their (lower) sales regression by exporting more and more cars abroad /Reuters
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