Volkswagen reported a steep 40% drop in first-quarter earnings, falling significantly short of market expectations, as the automaker booked charges related to potential EU emissions penalties and the valuation of vehicles affected by new U.S. tariffs.
Despite the earnings miss, shares in the German carmaker rose 8.2% after the U.S. administration announced a 90-day pause on newly imposed tariffs for several countries. However, a 25% tariff on automobile imports remains in effect, posing a continued risk to Volkswagen, which has substantial exposure to the U.S. market through vehicles produced outside the country.
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Europeâs autos index was up 4.9%, while the broader European index gained 7.9% as markets reacted to the temporary tariff relief.
Volkswagen said it had included a âŹ600 million ($658 million) provision in its quarterly results to cover potential fines for missing European Union carbon emissions targets. The automaker also booked âŹ200 million for restructuring its troubled software unit Cariad, which is undergoing layoffs.
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These charges brought Volkswagenâs operating return on sales down to 3.6%, compared to 6% in the same period last year.
The company declined to specify the cost impact from the U.S. tariffs but said the valuation of vehicles en route to the U.S.âwhere a 25% import duty came into force on April 3âhad weighed on results. Most of the Volkswagen brandâs U.S. sales are vehicles built in Mexico, while Audi and Porsche lack local production in the United States.
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Volkswagen reaffirmed its full-year guidance of up to 5% sales growth and an operating margin between 5.5% and 5.6%, though it noted that this forecast does not account for any future impact from the U.S. tariffs, citing uncertainty.