Europe’s biggest automaker, Volkswagen, is facing one of the most difficult periods in its history as falling profits, growing competition and weak demand force the company into a major overhaul.
Chief Executive Oliver Blume is preparing sweeping changes to help Volkswagen adapt to a global auto market reshaped by Chinese competitors, trade barriers and slowing demand in Europe.
The challenges are especially visible in the China auto market, once Volkswagen’s strongest source of earnings. Company profits from China have fallen by more than 80% over the past decade, reducing the importance of a market that helped drive years of growth.
China Challenges Hit Volkswagen’s Growth Model
Volkswagen was once China’s largest automaker. Today, it ranks third as local manufacturers gain customers through advanced technology and competitive pricing.
The pressure has also spread to Porsche, a premium brand within the Volkswagen group. Following the landmark Porsche IPO, the luxury carmaker’s profit margin dropped sharply to 1.1% last year from 18% during the year it was listed.
Industry changes have forced Volkswagen to rethink its long-standing strategy.
“Structural shifts in the global auto market have challenged the business model that supported Volkswagen for decades,” Reuters reported.
Profit Margins Shrink Amid EV Competition and Tariffs
Volkswagen’s group profit margins have more than halved between 2021 and 2025 as rising labor costs, energy expenses, growing automotive tariffs, and stronger electric vehicles (EVs) competition squeeze earnings.
The company remains the world’s second-largest automaker by vehicle sales, behind Toyota. However, it has become one of the weakest-performing mass-market manufacturers during the industry’s transition toward electrification.
Volkswagen Stock Falls Below Dieselgate Levels
Investors have punished the company’s performance. Volkswagen stock is trading at its lowest level since July 2010.
Remarkably, the shares are now worth less than they were during the Dieselgate emissions scandal, widely regarded as the company’s biggest corporate crisis.
For Volkswagen, the challenge is no longer recovering from a single scandal. It is adapting to a new automotive era where technology, pricing power and speed increasingly determine who survives.
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