ii view: Volkswagen issues another profit warning

A diverse portfolio of well-known brands and with significant restructuring activity ongoing. We assess prospects.

21st September 2026 11:14

by Keith Bowman from interactive investor

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Updated forecasts for the full year 2026

Now expects an operating profit margin of up to 1%, down from a previous forecast of between 4% and 5.5%
Now expects revenues of around €315 billion (£270 billion), down from 2025’s €321.9 billion
Continues to expect net cash flow for the automotive division of between €3 billion and €6 billion

ii round-up:

After the close of trading on Friday, Volkswagen AG (XETRA:VOW) lowered its expected operating profit margin forecast for the 2026 financial year.

The German automotive giant sighted factors including a further deterioration in the market environment, especially in China, as well as an accelerated shift in demand in favour of battery-electric vehicles against the backdrop of elevated petrol prices.

Shares in the automaker fell 2% in earlier European trading having come into this latest news down by just over a quarter so far in 2026. Fellow German car giant Mercedes-Benz Group AG (XETRA:MBG) is down by a similar amount during that time, while Bayerische Motoren Werke AG (XETRA:BMW) has fallen by more than a third. The German Dax index is up 4% year-to-date.

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The maker of brands including Audi and VW now expects full-year revenue of around €315 billion, down from 2025’s €321.9 billion.

Expected annual exceptional charges of €10 billion, including those for restructuring and staff losses, now see management forecasting a 2026 operating profit margin of up to 1%. That’s down from a previous forecast of between 4% and 5.5% and below 2025’s outcome of 2.8%.

Ongoing challenges for Porsche Automobil Holding SE PRF PERPETUAL EUR 1 (XETRA:PAH3), in which VW retains a major share stake, also feed into the expected exceptional charges being taken for 2026.

Volkswagen, however, maintained hopes for full-year net cash flow relating to the automotive division of €3-6 billion, with a divisional net liquidity target of €32-34 billion.

Broker Deutsche Bank reiterated its ‘buy’ rating post the news, noting that “excluding the €10 billion of special items, profitability remains close to expectations with cash generation forecasts maintained.”

A third-quarter trading update to late September is scheduled for 29 October.

ii view:

Started in 1937 and headquartered in Wolfsburg, Germany, the group today operates more than 100 production plants Europe, the Americas, Asia and Africa. Core brands take in VW, Skoda, Seat and Cupra with so-called progressive brands including Audi, Lamborghini and Bentley.

Geographically, Germany was its biggest market in 2025 at 20% of sales. Other European countries accounted for a further 44%, with North America 19%, Asia Pacific 12% and South America 5%.

For investors, outlook uncertainties include hindered Chinese consumer demand as well as challenged staff relations given ongoing restructuring and plant closures. Low-cost carmakers in China continue to target expanding sales in Europe and the US. Industry-wide doubt over the dominant fuel type going forward leaves VW covering all bases along with the associated costs, while pressured inflation following the Iran war has seen interest rates rising, making it more expensive to buy new cars.

On the upside, tough restructuring decisions aimed at eventually lowering costs and increasing profitability continue to be made. A diversity of brands, product types, and geographical regions has in the past allowed challenges for some to be countered by strengths for others. Speculation regarding a possible sale of its Ducati motorbike business persists, while maintained expectations for full-year automotive cash generation potentially supports a forecast dividend yield of over 6%.

In all, and while room for caution persists, ongoing management actions and a consensus analyst fair value estimate above €110 per share will likely keep more speculative investors interested in the recovery angle.

Positives:

Strong brand names including Audi and Volkswagen
Attractive dividend yield (not guaranteed)

Negatives:

Uncertain economic outlook
High EV competition

The average rating of stock market analysts:

Buy

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