Volkswagen delivered a stark warning on its outlook. The German automaker slashed its sales and delivery forecasts for 2026. It now expects revenue to fall by as much as 3%. Deliveries could drop between 3% and 7%. Just three months earlier, executives had predicted flat to modest growth.
The reversal stems from one market above all. China. Deliveries there plunged roughly 37% in the second quarter. First-half sales in the country fell more than 31%. Local rivals like BYD and Geely keep gaining ground on electric vehicles. The Wall Street Journal reported the downgrade was mainly due to that slump.
Profits took a hit too. Operating profit in the April-to-June period fell 9.5% to €3.5 billion. Revenue rose 2% to €82.4 billion. That produced a 4.2% margin. Analysts had hoped for better. The full-year margin target stays at 4% to 5.5%. Yet the numbers reveal pressure building across the board.
CEO Oliver Blume pushed back against the narrative of a company-specific failure. “This is not a Volkswagen crisis, it’s an industry crisis,” he said. Still, the group outlined radical steps. It plans to double job cuts to as many as 100,000 positions. Many would come in administrative roles worldwide. The company employs more than 650,000 people across brands including Audi, Porsche, Skoda and Seat.
Models will shrink too. Up to half the current lineup could disappear. Production capacity in Europe faces another reduction of 500,000 vehicles by 2030. Four German plants might not survive the next decade. Blume told reporters that all stakeholders understand the risks. The Guardian detailed how these moves aim to make the company “more innovative, faster, more attractive and robust.”
China’s Rise Forces Painful Reckoning
The scale of the challenge in China cannot be overstated. Once a cash cow, the market now drags results lower. Western automakers find themselves squeezed by domestic operators who mastered EVs faster and cheaper. Chinese brands have sharply increased exports. That pressure now reaches Europe.
BYD, Geely, SAIC and Chery grabbed a combined 11.2% share of the European market in June. That marked a jump from 7.5% a year earlier. They build plants in southern and eastern Europe. CFO Arno Antlitz noted it is hard to compete with underutilized facilities. “Chinese competitors are building plants in Southern and Eastern Europe,” he said.
Volkswagen’s own EV push shows mixed results. The group delivered nearly 983,100 battery-electric vehicles in 2025. That represented a 32% increase from the prior year. Yet overall vehicle sales growth stayed flat in some regions. The ID.4 production ended in the U.S. this spring. Business Insider reported the Chattanooga plant will stop assembly by mid-April 2026. U.S. sales will rely on existing inventory.
Blume highlighted another factor. Chinese carmakers expanded their lead on EVs. Volkswagen received 70,000 orders for new models in weeks, according to recent coverage. But the broader transition stumbles. Hybrids gain favor as pure EV demand slows in some markets. Automotive News noted China as the main drag on second-quarter earnings.
Costs run 20% higher than comparable businesses, Blume said in a memo. Tariffs add billions more. U.S. policy changes, including the end of certain EV subsidies, compound the strain. Rising manufacturing expenses don’t help. The industry faces a blitz of new Chinese product launches.
Shares reacted poorly. They fell about 1.5% after the results. Over five years, the stock has dropped 66%. Investors question whether the fixes will suffice. Russ Mould of AJ Bell observed that after nearly four years at the wheel, Blume faces mounting pressure. His plan involves drastic cost cuts, headcount reductions, fewer models and asset sales.
But execution won’t come easy. Powerful unions stand ready to resist. Earlier this month, Blume failed to push the full restructuring through the supervisory board. Tense negotiations lie ahead. The first 50,000 cuts were agreed late last year. Now the target has doubled.
Other automakers feel similar pain. BMW cut its profit guidance citing struggles in China and external shocks. The entire sector wrestles with overcapacity, shifting demand and geopolitical tensions.
So what comes next? Volkswagen bets on smaller, affordable EVs to close profitability gaps with combustion models. Sales chief Martin Sander expects the trend to continue into 2026, with launches like the ID Polo. Yet the company also bolsters hybrids. Customers want them now, including in China and the U.S.
The coming months will test Blume’s leadership. Restructuring must deliver. Factories, jobs and brands hang in the balance. One thing seems clear. The auto industry stands at a difficult crossroads. Legacy players like Volkswagen must adapt faster than ever. Or risk falling further behind the new competitors from the East.
Recent coverage from Reuters underscores the urgency. Blume warned that all new Chinese models are coming to Europe. The group must deepen cost cuts to stay competitive on its home turf. No easy answers exist. But inaction carries greater risk.
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