Volkswagen’s first-quarter earnings have been significantly impacted by the costs associated with EU carbon emissions penalties, resulting in a nearly 40% drop from market expectations, reported Reuters.
The European carmaker is grappling with the financial repercussions of not meeting the EU’s stringent carbon emissions targets, alongside the persistent effects of US tariffs on auto imports.
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Despite these challenges, Volkswagen shares experienced an 8% increase, buoyed by a temporary 90-day halt to new tariffs announced by the US administration.
However, a 25% tariff on auto imports continues to cloud the outlook for the company, which has considerable exposure due to its reliance on vehicles manufactured in Mexico and the lack of a US manufacturing base for its Audi and Porsche brands.
In response to industry pressure, the European Commission has proposed amendments to the current regulations, potentially allowing car manufacturers more time to increase sales of low-emission electric vehicles.
In response, Volkswagen has set aside €600m for possible fines in its first-quarter report, along with €200m for restructuring its software unit, Cariad, which is currently laying off staff.
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By GlobalDataThe company has maintained its full-year sales growth forecast of up to 5% but has noted that these projections do not account for the potential impact of tariffs.
Audi, part of the Volkswagen Group, has ceased the distribution of its vehicles at US ports following the enforcement of a 25% tariff by the US government.
This suspension affects cars that have arrived in the US post-2 April and has also led to a pause in deliveries to dealerships of vehicles subject to the new US tariffs.
Automobile Manufacturers’ Association director general Sigrid de Vries said: “The ongoing volatility of global markets is only increasing trade barriers and costs for businesses. Tariffs do nothing but raise prices for consumers across Europe, the United States, and the wider world.”
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