Auto giant Volkswagen cuts guidance as U.S. tariffs hit profit hard

Germany’s Volkswagen on Friday lowered its full-year guidance and reported a sharp drop in second-quarter profit, as the auto giant navigates the disruptive impact of U.S. tariffs.

Europe’s biggest carmaker posted operating profit of 3.83 billion euros ($4.49 billion) for the three months through June, down 29% from 5.4 billion euros a year ago.

Analysts had expected second-quarter profit to come in at 3.94 billion euros, according to a Factset-compiled consensus.

Volkswagen reported second-quarter sales revenue of 80.8 billion euros, also missing analyst expectations of 82.2 billion euros.

The results come as Europe’s automakers struggle to get to grips with a series of industry challenges, including robust competition from Chinese car brands and U.S. President Donald Trump’s import tariffs of 25%.

“Our half-year figures present a contrasting picture: on the one hand, we achieved strong product success and made progress in realigning the company,” Arno Antlitz, chief financial officer at Volkswagen, said in a statement.

“On the other, the operating result declined by a third year-on-year – also due to higher sales of lower-margin all-electric models. In addition, increased US import tariffs and restructuring measures had a negative impact,” he said.

Looking ahead, Volkswagen said it expects its full-year operating return on sales to range between 4% to 5%, down from 5.5% to 6.5% previously.

The automotive sector is widely regarded as acutely vulnerable to U.S. tariffs, particularly given the high globalization of supply chains and the heavy reliance on manufacturing operations across North America.

Trump recently threatened to raise duties on EU auto imports to 30% from Aug. 1, ramping up the pressure on the 27-nation trading bloc. The European Commission, the EU’s executive arm, has since been considering its response.

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— CNBC’s Jenni Reid contributed to this report.