Germany's carmakers retire the growth assumption

Oliver Blume delivered the most consequential line of Volkswagen's annual general meeting in a clause most listeners will have let slide past. The Group, he said on 18 June, is positioning its costs for zero-growth markets, and building its plan around a scenario of stable delivery volumes. Stripped of the boardroom cadence, that is a German carmaker telling its shareholders to stop expecting it to get bigger. The figures behind the speech explain why. Volkswagen sold 9.0 million vehicles in 2025, exactly as many as in 2024, and turned slightly less revenue into less than half the operating profit. [1]

One bad year would not deserve an essay, and neither would one company. What deserves one is that the continent's largest carmaker has now written down, in plain figures, an assumption every European volume maker had been quietly shedding: that the next decade looks like the last one, only larger.

01What actually fell

Operating profit is what a carmaker earns from building and selling vehicles before interest and tax; set against revenue it becomes the operating margin, the figure the industry reports as return on sales. Volkswagen's operating profit fell from €19.1 billion in 2024 to €8.9 billion in 2025, while revenue barely moved, at €321.9 billion. [1] The margin roughly halved with it, on essentially unchanged demand. The squeeze happened entirely inside the accounts, not in the showrooms.

So the plan Blume set out is a margin-recovery plan in the language of strategy. Eight levers, almost all of them subtractive: fewer models and variants, fewer platforms, less factory capacity, leaner management. The targets are explicit — net cost savings of more than €6 billion a year by 2030, and a return on sales of 8 to 10 per cent. [1] Reaching the bottom of that band would only carry Volkswagen back to where it sat two years ago. The 50,000 jobs to go across Volkswagen, Audi, Porsche and the software unit CARIAD, 35,000 of them at Volkswagen itself, are what rebuilding the margin costs when volume can no longer pay for it. [1]

The shape of the fall is the argument. As recently as 2023 these were robust businesses by any measure — group operating margins of roughly 8 per cent at Volkswagen, around 12 at BMW and Mercedes-Benz, nearly 18 at Porsche. [2] Two years on, every line has dropped hard and flattened far below where it began, and the latest reading, the first quarter of 2026, shows no turn back up. That quarter is no artefact of the data: Porsche's 7.1 per cent and Volkswagen's 3.3 per cent match the companies' own first-quarter reports almost exactly. [6][1]

02The same admission, in three other accents

Mercedes-Benz reached the conclusion first, and on purpose. Its doctrine of value over volume, selling fewer cars at a richer mix, is the deliberate version of what Volkswagen is now doing under pressure. It did not spare the margin: Mercedes' group operating margin fell from 8.4 per cent in 2024 to 3.7 per cent in 2025. [2] At its annual results in February 2026 it set the destination Volkswagen now shares: an 8 to 10 per cent return on sales for its car division in the medium term. [3] The two largest German car groups are circling an identical number, both from well below it.

BMW has held up best, and it is worth understanding why. Its group operating margin slipped only from 8.0 to 7.5 per cent in 2025, where the others fell by half or more. [2] Its policy of technology openness, keeping combustion, hybrid and electric lines in production together, looks in a flat and unpredictable market less like indecision than like insurance. BMW has long set the same 8 to 10 per cent as its strategic margin target and reaffirmed it with the 2025 results; it is the only one of the four within reach. Even so it guides to a 4 to 6 per cent automotive margin for 2026, with tariffs alone taking more than a point. [4]

Porsche shows what the steepest version of the squeeze looks like. It bet hardest on a single, premium, all-electric future, and the market refused the timetable. Its group operating margin fell from 13.7 per cent in 2024 to 0.9 per cent in 2025, after €3.9 billion of one-off charges tied to restructuring, batteries and tariffs. [2] In its strategic realignment of September 2025, Porsche moved its own goalposts to a double-digit return on sales in the medium term and more than 20 per cent in the long run — the economics of a true luxury house. [5] In 2025, against that ambition, it earned almost nothing.

The next few years are critical – and it is up to us.

Oliver Blume · Volkswagen AGM, 18 June 2026

03Why the floor moved

Four firms do not arrive at the same place by accident; the ground moved under all of them. The first shift is China, for two decades the pool from which German profit was drawn. Domestic brands now lead their home market on electric models and on price, and the imported German marque is no longer the default aspiration. The volume that funded the platforms, the plants and the dividends has thinned, and nothing of equal margin has filled the gap.

The second is trade. Blume named growing trade barriers as a planning assumption rather than a passing storm, and the numbers give the phrase weight: BMW attributes about 1.5 points of its 2025 margin, and a further 1.25 in 2026, to tariffs; Porsche booked hundreds of millions against United States duties inside its charge. [4][5] A car built in one bloc and sold in another now carries a cost that no showroom skill removes.

The third is the transition itself. Volkswagen is, by volume, Europe's electric leader — its all-electric deliveries rose 32 per cent worldwide and 66 per cent in Europe in 2025, taking a 27 per cent share. [1] That leadership does not yet earn what combustion earned, and the factories raised for a market that kept expanding now stand half-used in one that has stopped. Cut overcapacity, the third of the eight levers, is the polite name for closing the distance between a footprint built for growth and demand that delivers none.

04What a flat market rewards

A market that does not grow rewards a different set of instincts. For thirty years the reflex of a European volume maker was to chase share — more capacity, more variants — on the faith that scale would pay for itself. On a flat base that reflex destroys value: every marginal car is sold into a price fight and built in a plant already too large. The discipline that pays now is the opposite one. Fewer models that each sell more, capital sent only where it clears its cost, capacity matched to demand rather than to ambition. Every one of Volkswagen's eight levers is a version of that single instruction: subtract what a growing market once justified.

None of this is decline, and it is worth being precise about that. Nine million cars and €321.9 billion of revenue is an enormous, durable business; so are the order books at Mercedes and BMW. [1] The change is narrower and more demanding. Profit must now be manufactured from cost, mix and capital discipline, not delivered by a rising tide of demand. That is a harder operating problem than growth ever was, and it favours the houses that can hold their nerve on price and their hand on investment while the volume stays flat.