This topic discusses Volkswagen’s Q1 2025 earnings results.
Volkswagen Q1 2025 revenue topped analysts estimates while operating result missed estimate due to special effects
- Volkswagen Group preliminary report indicates Q1 2024 revenue rose 3% y/y to €78 billion (analysts estimate: €77.2 billion) while operating return on sales came in at 3.6%, lower than 5% estimate.
- The operating return was impacted by special effects amounting to €1.1 billion, which included €0.6 billion provision for CO2 regulation, €0.2 billion provision for CARIAD restructuring and €0.3 billion provisions for the diesel issue and valuation of vehicles in transit in connection with U.S. import tariffs.
- Volkswagen reaffirmed its 2025 guidance, including revenue growth of 5%, an operating return on sales of 5.5% to 6.5%, net cash flow in the Automotive Division of €2 to €5 billion, and Automotive Division net liquidity between €34 and €37 billion.
- Volkswagen said the 2025 guidance excludes the impact from tariffs since its impacts cannot be conclusively assessed at the present.
Assessment
Excluding special effects, Volkswagen Group’s Q1 2024 operating result would likely have been in line with estimates. However, the €0.6 billion provision for CO₂ regulation was significantly higher than my estimate of €0.1 billion.
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Here are the analysts opinions following the preliminary results;
- Neutral, €105->€84: Analyst Patrick Hummel of UBS said he cut his earnings estimates for European automakers by 20 to 30 percent. He now expects global car production to decline this year instead of a slight growth that had been forecasted.
- Buy, €139: Warburg analyst Fabio Hölscher said Volkswagen’s preliminary figures fell short of expectations. He pointed out that the weak profitability is no longer surprising given previous statements.
- Buy, €140: Analyst Philippe Houchois of Jefferies said Volkswagen’s operating result (EBIT) is close to the consensus estimate.
- Neutral, €110: Analyst Jose Asumendi pointed out that the pre-publication indicate a “volatile start to the year”. He added that the management reiterated their 2025 guidance, signaling that the 2025 budget remains on track.
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Porsche lowers its 2025 forecast due to expected increase in battery costs, supply chain costs and impact of tariffs in April and May
- Porsche lowered its revenue guidance for 2025 to a range of €37 and €38 billion (prior guidance: €39 to €40 billion), lower than analysts estimate of €38.8 billion.
- It also lowered its operating return on sales guidance to a range of 6.5% and 8.5% (prior guidance: 10% to 12%) and automotive net cash flow margin to a range of 4% and 6% (previous guidance: 7% to 9%), lower than analysts estimate of 10.3%.
- The adjusted forecast takes into account impact of trade tariffs in the month of April and May, expected increase in battery costs by €0.5 billion and increase in supply costs, especially in the Chinese market due to geopolitical tensions.
- Porsche shares lost 2.8% while Volkswagen Group shares were little changed.
Assessment
It’s not surprising that Porsche had to lower its 2025 revenue guidance. Given its challenges in China and the weak demand for EVs, I had projected its 2025 revenue at €36.2 billion. However, it is the operating return on sales guidance that has fallen significantly below my expectation of 11%. Considering that I expect the U.S. tariff to create a headwind of up to €1.9 billion for Porsche, today’s adjustment is unlikely to be the last.
Porsche average prices continue to rise, tariff headwind likely smaller than expected, supply chain and China issues persist
- Porsche’s Q1 2025 revenue fell 1.7% year over year to €8.86 billion (analyst estimate: €8.84 billion), while its operating return on sales came in at 8.6%, slightly below the analyst estimate of 8.8%.
- The decline in vehicle deliveries by 7.9% y/y to 71,470 units was largely offset by average price increase from €115,000 to €121,000.
- On the earnings call, CFO Jochen Breckner stated that the tariff headwind for April and May was approximately €300 million. This implies that, if conditions remain unchanged (tariff rate, unit volumes, pricing), the full-year impact by absorbing all the costs could be around €1.35 billion (minute 47:50).
- Breckner noted that supply chain challenges are expected to persist into 2026, citing the complexity of the issue and the increasing share of electric vehicles (minute 44:31).
- He also stated that Porsche is seeing normal demand patterns in the U.S., despite ongoing tariff uncertainty (minute 59:55).
- Regarding China, Porsche expects deliveries to decline to around 45,000 units in 2025, down from 56,000 in 2024, and does not expect the market to stabilize soon (minute 17:45).
Assessment
It’s encouraging to see that demand for Porsche vehicles in the U.S. remains stable despite the tariff uncertainty. I had been skeptical of Porsche’s ability to meet its revenue targets given declining volumes, but the €6,000 increase in average selling price has improved my confidence. Additionally, the estimated tariff impact based on the April and May headwind is smaller than my initial projection of €1.98 billion. However, I won’t cancel my estimate given that not all quarters have the same unit sales and average price. Stable demand in the U.S., despite the significant price increases and tariff uncertainty, suggests that Porsche should be in a position to absorb much of the tariff cost. That said, I remain concerned about its poor performance in China and the recurring one-off charges, particularly those related to supply chain issues — which indicate ongoing execution challenges.
Q1 2025 Porsche Webcast Call
Q1 2025 Porsche Earnings Call Summary
Volkswagen reiterated its 2025 guidance but now expects results to come in at the lower end of the range
- Volkswagen Group reiterated its 2025 guidance: revenue is expected to grow by 5%; operating return on sales is forecast between 5.5% and 6.5%; automotive net cash flow is projected between €2.0 billion and €5.0 billion; and Automotive Division net liquidity is expected to range between €34 billion and €37 billion.
- However, the company now expects outcomes at the lower end of each guidance range, citing developments up to April 28, 2025.
- Importantly, the guidance does not yet reflect the potential impact of U.S. tariffs.
- Volkswagen shares shed 3% following the report.
Assessment
The reduced guidance was largely anticipated after Porsche lowered its outlook. However, it’s surprising to see the market reacting to it now.
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Volkswagen expressed confidence in its 2025 guidance, which does not account for the potential impact of U.S. tariffs.
- In the earnings call, CFO Arno Antlitz expressed confidence in the 2025 guidance, citing a strong order bank and intake driven by new product launches, as well as the ongoing execution of performance programs (minute 16:30).
- The order bank in Western Europe stood at 1 million units in Q1, while order intake rose 29% year over year. Antlitz noted that current order intake extends into Q3 (minute 16:30).
- Antlitz said the €600 million CO2 provision does not factor in proposed legislative changes from the EU Commission. He added that if the current regulation remains unchanged, the provision would cover the full year; otherwise, the required amount could be slightly lower. However, he remains cautious given the ongoing volatility and uncertainty in the regulatory framework (minute 1:17:04).
- Antlitz also said he was pleased with the performance of the China team, particularly in the areas of technology, product development, and innovation (minute 15:10).
Assessment
While Volkswagen Group’s guidance excludes the impact of U.S. tariffs—which I estimate at €2.9 to €6.2 billion (weighted: €3.4 billion), it is noteworthy that the company is maintaining its guidance, whereas peers such as GM, Mercedes-Benz, Stellantis, and Volvo have suspended theirs, citing macro uncertainty. This suggests that Volkswagen may revise its guidance in the near future. Therefore, I will treat their guidance with some caution.
What I appreciated in the earnings call were management’s comments signaling that the China strategy is on track, the CO2 headwind has become minimal due to a growing BEV share, and that performance programs are progressing as planned and helping offset the margin dilution from BEVs.