US tariffs result in a 40% drop in Volkswagen's earnings
Crunching the Numbers
According to the latest financial reports, Volkswagen Group's revenue from sales reached an impressive 77.6 billion euros (+2.8% year-over-year). Yet, the group's operating margin took a hit, falling to 3.7% from a robust 6% in Q1 2024. Profit before tax dropped to 3.1 billion euros, a significant drop from 5.1 billion euros in the previous year. After tax, the figure stood at -2.18 billion euros, compared to 3.68 billion euros. Volkswagen Group's CFO, Arno Antlitz, termed the start of the year as "mixed". The decline in profitability is attributed to increased costs, excess capacity at European plants, weak demand in China, and uneven electric vehicle purchases in Europe and the US. The looming threat of tariffs imposed by Washington further adds to the woes, according to Bloomberg.
In the pre-market, Volkswagen Group shares dipped 0.86%. The US has implemented a 25% tariff on the import of vehicles and parts produced outside the US since April 3. It's worth noting that for vehicles produced under the USMCA agreement, tariffs will apply only to "non-US content".
In response to the tariffs, several European automakers, like Volvo and Mercedes-Benz, are mulling over moving vehicle production to the US. Audi has announced that vehicles imported into the US after April 2 will not be temporarily handed over to dealers. Nissan Motor is also considering moving some production to the US. British automakers Aston Martin and Jaguar Land Rover are limiting supplies to the US.
European automakers are strategically shifting production to the US to reduce tariff burdens, gain easier access to the American market, secure investment incentives, and comply with local regulations more effectively. This move also demonstrates a commitment to the American market and can potentially influence future trade policies in their favor. However, the specific responses from Volvo and Mercedes-Benz regarding the tariffs' impact on their production strategies remain unclear. In the rapidly changing tariff landscape, companies in the automotive industry are adapting by adjusting production locations, absorbing costs, or temporarily halting production.
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- The decline in Volkswagen Group's profitability, as stated by their CFO Arno Antlitz, is exacerbated by the looming threat of tariffs imposed by Washington, as reported by Bloomberg.
2.VDAG shares dipped 0.86% in the pre-market, attributed partly to the US implementing a 25% tariff on the import of vehicles and parts produced outside the US since April 3.
- To combat these tariffs, European automakers like Volvo, Mercedes-Benz, Audi, Nissan Motor, Aston Martin, and Jaguar Land Rover are strategically shifting production to the US, aiming to reduce tariff burdens, gain easier access to the American market, and comply with local regulations more effectively.
