By Victoria Waldersee
STUTTGART, Germany (Reuters) -Volkswagen said on Wednesday it expects profit margins this year towards the bottom end of its forecast, the latest automaker to strike a downbeat tone as an industry already pressured by costs and competition grapples with tariff uncertainty.
The German group, which suffered a 40% drop in earnings in the first quarter, now sees its annual operating profit margin closer to 5.5% than its earlier projection of 5.5%-6.5%.
It also expects net cash flow towards the lower end of its forecast of 2 billion euros to 5 billion euros ($2.3-5.7 billion) and net liquidity close to 34 billion euros.
Car companies, initially hesitant to factor in the impact of U.S. President Donald Trump’s erratic tariff policies into financial forecasts, have begun to change their tune as the costs of the trade war weigh on first quarter results.
Mercedes-Benz, whose earnings before interest and taxes fell 41% in the quarter, pulled its guidance for the year altogether, saying a persistent trade war would hit margins.
Stellantis and General Motors also suspended forecasts for the year, and Volvo Cars, one of the most exposed European automakers to U.S. tariffs as most of the cars it sells there are imported from Europe, withdrew its forecast for the next two years.
Porsche, which has no production in the United States and so is heavily exposed as well, said on Tuesday that tariffs led to a hit of at least 100 million euros in April and May alone.
Volkswagen said its outlook still did not factor in the impact of tariffs, but that challenges including “political uncertainty, growing trade barriers and geopolitical tensions” meant it was reining in its margin guidance.
Battery-electric car sales, which more than doubled in Europe in the first quarter, also weighed on margins, Volkswagen said, in a sign of the difficulties faced by legacy carmakers to extract the sort of profits from EVs that they have long enjoyed for combustion engine cars.
“We need to ensure a competitive cost structure alongside our strong offering of vehicles to stay successful in a rapidly changing world,” Chief Financial Officer Arno Antlitz said in a statement.
($1 = 0.8790 euros)
(Reporting by Victoria Waldersee in Stuttgart. Additional reporting by Amir Orusov in Gdansk. Editing by Thomas Seythal and Mark Potter)
