Initiation of Coverage- Volkswagen’s Battle Under Pressure: Tariffs, Trade Woes & The Hidden Upside!

Volkswagen AG is navigating one of its most complex periods in recent memory, marked by intensifying trade tensions, costly restructuring, and strategic recalibration across key markets. The company’s Q1 2025 results and full-year 2024 earnings call paint a picture of a resilient but deeply challenged automaker. Operating profit dropped nearly 40% YoY to €2.8 billion, primarily due to restructuring expenses and early impacts of U.S. tariffs on vehicle shipments, while full-year profit after tax fell 31% to €12.4 billion. The company’s €3.5 billion U.S. bond issue and €1.25 billion in auto-loan-backed securities underscore its need to reinforce liquidity amidst growing cost pressures. Despite revenue ticking up to €325 billion, Volkswagen is confronting a trifecta of headwinds:
punitive tariffs, heavy job cuts, and eroding share in China. Yet, amidst these difficulties, the group’s
electrification strategy, strong North American momentum, and revamped product pipeline offer reasons for cautious optimism.