Main information
- Volkswagen’s profits in the second quarter fell due to the increase in customs duties.
- The company has revised its forecasts for the whole year due to customs duties.
- CEO Oliver Blume is trying to conclude an agreement with the United States government to reduce the rate of customs duties.
The Volkswagen’s second quarter results report revealed a significant impact due to the increase in American customs duties on cars. CEO Oliver Blume expressed hope for a single agreement with the United States government, subject to an initial agreement between the EU and the United States.
Blume highlighted the attractiveness of Volkswagen’s investment program for potential location in the United States, which could include an Audi factory.
Impact of customs duties on financial performance
The impact of these customs duties is already obvious in the financial performance of Volkswagen. The profits from the second quarter dropped almost 30 percent to 3.8 billion euros, with revenues of 3 percent to those of the previous year, which amounted to 80.8 billion euros. During the first half -yearly half, the Volkswagen group borne costs of more than 1.3 billion euros due to customs duties.
Consequently, the company has revised its forecasts for the whole year and now provides for a profit margin of operations between four and five percent, a reduction of 1.5 percentage points compared to previous projections.
Influence of possible prices and solutions
The taxation by US President Donald Trump of a surcharge of 25 percent on cars imported in April has disproportionately assigned high-end brands of Volkswagen, Audi and Porsche, which depend entirely on imports because they do not have manufacturing facilities in the United States. Although Volkswagen has absorbed these increased costs so far, Blume has indicated that potential price adjustments would depend on the final price rate.
Blume personally provides a customs tariff of 15 percent, which he deems too high for Volkswagen. He underlined the company’s commitment to take advantage of its investments in the United States to further lower this rate. The European Commission remains determined to reach an agreement with the United States and continues to believe in a potential compromise. If this does not materialize, there is a good chance that Volkswagen should consider the possibility of an investment program in the United States. (JV)
