Volkswagen Group is reportedly facing a potential financial crisis with a projected €11 billion cash-flow gap in 2026, according to internal reports cited by the German newspaper Bild. The company, which is the largest carmaker in Germany, would be unable to fund its operations and investments without significant cost cuts or asset sales. This development highlights the challenges facing the German auto industry, which is struggling with reduced profits, a decline in China, increased competition from Chinese EV makers, and the impact of US tariffs.
The financial strain has prompted internal discussions about possible measures to address the crisis, including cost-cutting across various departments, the sale of some holdings, and strategic asset disposals. Senior management described the situation as ‘particularly fatal’ during the transition from combustion engines to electric vehicles. As part of its restructuring process, Volkswagen has also announced major leadership changes. CEO Oliver Blume will relinquish his dual role as head of both Volkswagen Group and Porsche AG, with Michael Leiters, former McLaren chief, taking over at Porsche on January 1. Blume will remain as the CEO of Volkswagen, focusing on a broader restructuring and turnaround effort through 2030. These changes are part of Volkswagen’s efforts to stabilize its financial position and adapt to the rapidly evolving automotive market.
The German automakers, including Volkswagen, BMW, and Mercedes-Benz, are all facing a tough period as they compete with Chinese EV brands like BYD, which are gaining momentum in their biggest market, China. The situation has been further complicated by US trade measures, with Washington’s 25% tariffs on European-built vehicles impacting sales. Although an EU-US agreement in August lowered the maximum tariff rate to 15%, the uncertainty surrounding future trade policies continues to weigh on export plans and investment strategies. As the industry undergoes a significant shift towards EVs, the financial challenges faced by Volkswagen underscore the need for substantial investment, innovation, and strategic restructuring to remain competitive in the global market.