Volkswagen Group CFO Arno Antlitz warns that a 3.8% operating margin threatens long-term vehicle investments, driving urgent R574 billion cost cuts.
Volkswagen Group Chief Financial Officer and Chief Operating Officer Arno Antlitz addressed the group’s financial performance following its nine-month earnings report. He issued a stern warning regarding the carmaker’s narrow operational profitability. Addressing investors and industry analysts, Antlitz stressed the necessity of urgent structural adjustments to maintain long-term competitiveness in a challenging global market.
“Our operating return on sales after nine months is just 3.8%. That means that for every €100 [approximately R1 855] in sales revenue, less than €4 [approximately R75] remain as operating profit. That is not enough in the long term. Even in this challenging environment, we want to continue investing in highly competitive vehicles and state-of-the-art technologies for our customers. We can only do this if profitability increases,” Antlitz stated.
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Operational headwinds and narrowing margins
The German automotive giant faces mounting cost pressures across its primary global operating regions. Antlitz noted that trade restrictions, US tariffs, and intensifying market contraction within China continue to erode the company’s operating performance. Furthermore, European market dynamics present severe competitive pricing environments.
The ongoing shift toward electric vehicles also adds immediate margin pressure. Battery electric vehicles currently generate lower profit margins per unit than equivalent internal combustion engine models. Although European electric vehicle orders increased substantially, the overall margin dilution lowers group earnings.
“The market success of our electric vehicles is putting additional pressure on our earnings,” Antlitz highlighted during the call. “We cannot afford to lose any time and must act quickly and decisively.”
Comprehensive cost restructuring framework
To counter declining profitability, Volkswagen Group outlined its Future Plan 2030, which establishes a structural cost-reduction framework designed to recover baseline margins. The strategy targets approximately €31 billion (approximately R574 billion) in comprehensive savings, combining €20 billion (approximately R371 billion) in operational cost reductions with €11 billion (approximately R204 billion) in overhead adjustments. Key focus areas include streamlining the global model portfolio, reducing factory overhead, simplifying corporate organisational structures, and accelerating core technology development cycles.
Despite earnings pressure, Volkswagen confirmed its full-year financial outlook. The group projects sales revenue around €315 billion (approximately R5.8 trillion), backed by automotive division liquidity positions exceeding €32 billion (approx. R593 billion). However, management reiterated that future investments in next-generation platforms rely entirely on achieving sustained execution of its planned cost reductions.
Volkswagen’s aggressive EV product strategy
Under its group-wide long-term strategy, Volkswagen aims to transform into a software-driven global automotive tech driver, targeting a 50% share of battery-electric vehicle sales globally by 2030 and progressing toward zero-emission vehicle fleets in major markets by 2035. Central to this decade-long roadmap is the transition from its current Modular Electric Drive (MEB) platform to the next-generation Scalable Systems Platform (SSP). This is a unified architecture designed to underpin high-volume models like the upcoming electric Golf and T-Roc models. The structure also dramatically lowers assembly complexity and manufacturing costs.
To expand market adoption, the group is deploying a dual-track strategy featuring accessible entry-level models, such as the production version of the ID. Polo, alongside localised technology developments. This includes leveraging regional platforms like its China-developed architecture across cost-sensitive emerging markets, standardising battery cells through its PowerCo subsidiary to reduce cell costs by up to 50%, and deepening joint ventures for Western software architectures to build a profitable, highly scalable electric ecosystem.
