Staff Reporter

Volkswagen (VOW3.DE, VWAGY) announced on Wednesday that it expects its profit margins for this year to fall towards the lower end of its forecast.

This marks yet another automaker expressing concern as the industry grapples with rising costs and increased competition amid ongoing tariff uncertainties.

The German automaker, which experienced a 40% decline in earnings during the first quarter, now projects its annual operating profit margin to be closer to 5.5%, down from the previous estimate of 5.5% to 6.5%.

It also anticipates net cash flow to be at the lower end of its forecast, ranging from 2 billion euros to 5 billion euros ($2.3 billion to $5.7 billion), with net liquidity expected to approach 34 billion euros.

Initially, car manufacturers were reluctant to incorporate the impacts of U.S. President Donald Trump’s unpredictable tariff policies into their financial forecasts.

However, as the trade war begins to take its toll on first-quarter results, many are revising their outlooks.

Mercedes-Benz reported a 41% drop in earnings before interest and taxes for the quarter and has since withdrawn its guidance for the year, citing ongoing trade war concerns that could affect margins.

Similarly, Stellantis and General Motors have suspended their forecasts for the year. Volvo Cars, particularly vulnerable due to its reliance on imported vehicles from Europe for the U.S. market, has also retracted its projections for the next two years.

Porsche, which has no production in the U.S. and is therefore significantly impacted, reported a loss of at least 100 million euros due to tariffs in just April and May.

While Volkswagen stated that its outlook does not yet account for the full impact of tariffs, it acknowledged that challenges such as “political uncertainty, growing trade barriers, and geopolitical tensions” have prompted a reassessment of margin forecasts.

The company also noted that sales of battery-electric vehicles, which more than doubled in Europe during the first quarter, are putting additional pressure on profit margins.

This highlights the ongoing struggles of traditional automakers to achieve the same profit levels from EVs as they have with combustion engine vehicles.

“We need to ensure a competitive cost structure alongside our strong offering of vehicles to stay successful in a rapidly changing world,” said Chief Financial Officer Arno Antlitz in a statement.