Volkswagen Expects Operating Margin of No More Than 1% in 2026 and Suspends Development of Electric Golf
Key Facts
Volkswagen maintained its 2026 outlook for revenue of around 315 billion euros and a return on sales of up to 1%, as reported in its results published on October 29. The ceiling reflects significant pressure on the group’s profitability in a year in which it expects to record a substantial exceptional impact on earnings. Volkswagen cut its forecast in September from a range of 4.0% to 5.5%, after analysts’ average forecast stood at 4.1%. On a year-on-year basis, the operating return on sales was 2.8% in 2025. The company said the forecast assumes that the international trade tariff situation remains unchanged.
The outlook came as nine-month results showed revenue of 233.4 billion euros, compared with 238.7 billion euros in the same period of 2025. Operating profit was just 0.1 billion euros, versus 5.4 billion euros a year earlier. Before special items, operating profit reached 8.8 billion euros, and the operating return on sales was 3.8%. Volkswagen said special items worth 8.7 billion euros weighed on earnings during the period, including 7.8 billion euros in the third quarter. The gap between the reported result and the result before special items shows the scale of these costs’ impact on the accounts.
The group attributed the pressures to a weak market environment in China, intensifying pricing and competition pressures globally, and a rising share of lower-margin electric vehicles. The special items included a non-cash write-down of 6.4 billion euros in goodwill related to Porsche. They also included non-cash impairment adjustments of around 1 billion euros on assets of Chinese companies fully consolidated within the group. In its outlook review, Volkswagen estimated that the special impact on full-year operating profit could reach around 10 billion euros. Excluding those effects, it forecast an operating return on sales of around 4% in 2026.
Operating pressures extended to sales, with the group selling 5.9 million cars in the first nine months of 2026, down 11% from 6.6 million cars in the same period a year earlier. But demand indicators in Europe presented a more balanced picture: total orders there rose by around 4% year on year. Orders for battery-electric vehicles increased 39% over the same period. On liquidity, the automotive division recorded net cash flow of 4.4 billion euros, up from 1.8 billion euros a year earlier, an increase of 145%. The improvement in cash flow coincided with weak reported operating profit and lower sales volumes.
In a sign of its investment priorities, Volkswagen said it had temporarily suspended development work on the future ID.Golf until it could accommodate the required investments. David Powels, finance chief of the Volkswagen brand and the core brands group, attributed the decision to the need to secure those investments within available resources. Chief Executive Thomas Schäfer had said the company could not afford the work at present. Reuters quoted the works council as expecting the development suspension not to delay the model’s launch. The decision places the electric-car program in the context of spending reprioritization as the group faces pressure on profitability and substantial exceptional costs.
Volkswagen expects net cash flow in the automotive division in 2026 to range between 3 billion and 6 billion euros, and the division’s net liquidity to reach between 32 billion and 34 billion euros. These figures remain tied to the assumption that the international trade tariff situation stays unchanged. The company said it could not yet reliably estimate the potential impact of any escalation in the Middle East. The September review also indicated that most additional special items were expected to be recorded in the third-quarter profit and loss accounts. The group published its nine-month results on October 29, while its annual outlook sets out the liquidity and cash-flow range it is targeting amid continuing pressures.