German auto giant Volkswagen announced Tuesday a sharp drop in its annual profits during a torrid year that saw Europe's top carmaker increasingly struggle with high production costs and fierce Chinese competition, in addition to talks it had over potential closures of some plants.
At 12.4 billion euros ($13.4 billion) in 2024, net profit plunged 30.6% compared with the previous year, even as overall sales grew slightly to reach 324.7 billion euros.
The poor results were due to a "significant increase in fixed costs" and one-off expenses totaling 2.6 billion euros, primarily aimed at restructuring, the company said.
Volkswagen has been hit hard not just by rising costs but also by a stuttering switch to electric vehicles, where it faces stiff competition from Chinese rivals.
The 10-brand group, whose models range from Audi to Seat and Skoda, had a particularly difficult 2024, marked by a long dispute with unions that ended with a deal in December to cut 35,000 jobs in Germany by 2030.
The carmaker ultimately decided against closing factories at home for the first time ever – but its problems nevertheless highlighted a broader crisis buffeting Europe's ailing auto industry as it struggles to keep pace with rapid changes.
Highlighting Volkswagen's difficulties, its deliveries last year to China – its single biggest national market – fell almost 10%, even as they were flat or rose in the rest of the world.
The weakness in China was behind an overall 3.5% drop in unit sales, with Volkswagen only shifting around 9 million vehicles worldwide last year.
Cost pressures also squeezed Volkswagen's profit margins down to 5.9% in 2024, from some 7% the previous year.
The outcome was somewhat better than feared by the group, which midway through last year predicted a margin of some 5.6% for 2024.
"Consistently reducing costs and increasing profitability" was key for the firm going forward, Volkswagen finance chief Arno Antlitz said in a statement.
But Ferdinand Dudenhoeffer, director of the Center for Automotive Research institute in Germany, said the politics of deep cost cuts would be difficult for the firm, pointing out that it was part-owned by the German state of Lower Saxony.
"The Volkswagen brand, its factories and development centers, are found far too often in Germany, an expensive place to do business, and particularly in Lower Saxony," he said.
"VW is a 'semi-state-owned' enterprise and cannot adjust costs like its competitors can."
Volkswagen said it expected revenue this year to exceed the 2024 figure by "up to 5%." For 2025, it is aiming for a margin of between 5.5% and 6.5%.
But the carmaker also warned 2025 could be marked by challenges arising "from an environment characterized by political uncertainty, increasing trade restrictions and geopolitical tensions."
U.S. President Donald Trump has upended global trade by unleashing a series of tariffs and threats targeting U.S. allies and adversaries.
The EU is also in his crosshairs as he is threatening to hit the bloc with 25% duties.
