ii view: VW cautious as tariffs and Iran war affect business
Responsible for an array of well-known auto brands and with the shares offering an attractive dividend yield. Buy, sell, or hold?
10th March 2026 12:42
by Keith Bowman from interactive investor
Fourth-quarter (Q4) and full-year (FY) results to 31 December
- FY revenue down 0.8% to €322 billion (£279 billion)
- Operating profit down 53% to €8.9 billion
- Q4 operating margin of 4.2%
- Dividend down 17% to €5.20 per ordinary share
Guidance:
- Forecasts 2026 revenues of between €322 billion and €332 billion
- Expects a 2026 profit margin of between 4% and 5.5%
Chief executive Oliver Blume said:
“In 2025 we put the new strength of the Volkswagen Group on the road and kept our company firmly on track, despite increasing global headwinds.
"In 2026, we will launch affordable electric mobility with premium technology. In the Chinese market, we will start the largest product campaign in our history. And we will set key milestones for batteries, software and autonomous driving on our path to becoming the global automotive technology driver.”
- Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts
ii round-up:
Volkswagen AG (XETRA:VOW) today detailed annual results for 2025 that broadly matched City forecasts, although the European car giant is cautious about 2026 due to a cocktail of factors including trade disputes and fierce competition.
A 0.2% decline in sales to 9 million vehicles year-over-year left full year revenue down 0.8% at €322 billion. US trade tariffs and costs to develop new Porsche electric vehicles (EV) pushed annual operating profit down 53% to €8.9 billion on an operating profit margin of 4.2%.
Against a backdrop of hopes for an end to the Iran war, Volkswagen shares rose 3% in European trading. VW shares came into these latest results down around 15% so far in 2026. The German DAX index started the day down 4.4% year-to-date. Bayerische Motoren Werke AG (XETRA:BMW) has fallen 13% this year.
Volkswagen brands include Audi, Škoda, Lamborghini, Bentley, Cupra and SEAT as well as a major stake in Porsche Automobil Holding SE PRF PERPETUAL EUR 1 (XETRA:PAH3), which floated on the stock market relatively recently.
Annual profit excluding special costs such as those related to Porsche but still including US tariffs retreated 5.5% to €15.7 billion.
VW forecasts 2026 revenues of between €322 billion and €332 billion on an operating margin of between 4% and 5.5%. An estimated improvement in the operating margin to 8-10% by 2030 is down from management’s previous 9-11% target. But it admits that conflict in the Middle East will affect sales of luxury cars there.
Fourth-quarter vehicle sales fell 5% year-over-year to 2.4 million units, with 17% declines in the US and China partly countered by 6% and 3% gains in Europe and Latin America respectively. By brand, there were gains for Skoda, SEAT and Audi but falls for Porsche, the VW brand itself and trucks.
A total dividend payment of €5.20 per ordinary share is down 17% from 2024. A first quarter 2026 update is scheduled for 30 April.
ii view:
Started in 1937 and headquartered in Wolfsburg, Germany, VW today employs over 650,000 people. The company’s portfolio comprises 12 brands covering all segments, from motorcycles to supercars and heavy trucks. As well as a shareholding in Porsche, other interests include a joint venture with US EV maker Rivian Automotive Inc Class A (NASDAQ:RIVN) and a shareholding in Chinese owner of the MG brand SAIC
For investors, outlook uncertainties include demand across the war-torn Middle East, potentially higher energy production costs, as well as continuing US tariffs. Low-cost carmakers in China have been targeting sales growth in Europe and the US. High oil prices due to events in the Middle East could drive up inflation and even force increases in interest rates, dampening consumer demand, while industry wide uncertainty over which will be the dominant fuel type has left VW still covering all bases.
- Where investment professionals are investing their ISA
- Investing in themes: what investors need to know
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
More favourably, a diversity of brands and product types continues to see challenges for some countered by strengths elsewhere. Tough restructuring decisions and costs have largely already been taken. A focus on new EV models has previously shown signs of boosting customer demand, while a forecast dividend yield of over 5% is not to be ignored.
For now, the challenging outlook continues to offer grounds for caution. That said, its strong market position and consensus analyst fair value estimate above €130 per share are likely to keep investors interested in this potential recovery play.
Positives:
- Strong brand names including Audi and Volkswagen
- Attractive dividend yield (not guaranteed)
Negatives:
- War disrupting Middle East market
- Uncertain economic outlook
- High EV competition
The average rating of stock market analysts:
Buy
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.