Key points
- Lower-margin EV sales and restructuring costs also weighed heavily on earnings
- North American sales volume dropped 16pc, mainly due to tariffs
- Tariffs are likely to remain a permanent burden: Finance chief Arno Antlitz
FRANKFURT, Germany: German auto giant Volkswagen said Friday that tariffs imposed by US President Donald Trump had cost it 1.3 billion euros in the first half of the year as it reported falling profit.
Overall net profit fell 38.5 per cent year-on-year during the period to hit 4.48 billion euros ($5.26 billion).
Higher-sales of lower-margin electric vehicles (EVs) as well as restructuring costs hit the result in addition to the tariffs, Volkswagen said.
Finance chief Arno Antlitz said Volkswagen was nevertheless “on the right track” and that performance was at the “upper end of expectations”, if tariffs and restructuring costs are excluded.
“A permanent burden”
But he warned on an earnings call that “tariffs are likely to remain a permanent burden” and said Volkswagen would have to redouble cost-cutting efforts “to offset” the effect.
The crisis-hit company struck an unprecedented deal with unions last December to cut 35,000 jobs in Germany by 2030 as part of plans to save 15 billion euros a year.
The 10-brand group also cut its revenue and profit outlook, warning of “political uncertainty and increased barriers to trade” for the remainder of the year.
It now forecasts a profit margin for the year of between 4 and 5 per cent, down from 5.5 to 6.5 per cent previously, amounting to billions of euros for the firm.
The range assumes that the United States will levy tariffs of 10 per cent on imported cars in the best case and stick to its current rate of 27.5 per cent in the worst, Volkswagen said.
Volkswagen’s previous guidance, released in April shortly after new US tariffs took effect, did not take the increased duties into account.
“Mainly due to tariffs”
Sales by volume in North America fell 16 per cent “mainly due to tariffs” in the first half even as they rose slightly worldwide, Volkswagen said.
Trump in April slapped an additional 25-per cent levy on imported cars as part of an aggressive trade policy he says will help boost US manufacturing.
That has hit European carmakers. French group Stellantis — whose brands include Jeep, Citroen and Fiat — said on Monday that North American vehicle sales by volume plunged 25 per cent in the second quarter of the year.
READ ALSO: US Tariffs, Laws Push Jeep Owner Stellantis Into €2.3bn First-half Net Loss
US and European Union diplomats are currently negotiating ahead of the latest deadline set by Trump, with Trump threatening a blanket duty of 30 per cent after August 1 if no agreement is reached.
“A balanced outcome”
CEO Oliver Blume said on the earnings call that he had a clear “plea” to negotiators.
“We are counting on the EU Commission and the US government to reach a balanced outcome on the tariff issue,” he said. “This is the basis for a competitive economy on both sides of the Atlantic.”
The carmaker’s shares were down 1.0 per cent on the Frankfurt Stock Exchange, which was 0.9 per cent lower overall.
