Volkswagen Group of Germany is increasing sales in Europe’s electric vehicle market but is struggling with worsening profitability. Lower EV margins than internal combustion engine cars, weak performance in China, U.S. tariffs and large one-off costs have combined to slow an earnings turnaround.

InsideEVs reported on Oct. 29 that Volkswagen Group delivered 209,100 battery-electric vehicles in Europe in the third quarter. That was up 19.6 percent from a year earlier. But deliveries fell sharply in the United States and China, and global EV deliveries slipped 4.7 percent to 240,200.

Even in Europe, where EVs sold well, improving profit was not easy. Arno Antlitz (Arno Antlitz), Volkswagen Group’s chief financial officer and chief operating officer, said, "Expanding EV sales is instead adding an additional burden to results." He said earnings from EVs are lower than from combustion-engine cars.

Volkswagen Group’s third-quarter operating loss reached 5.86 billion euros, or about 87.7 trillion won. Quarterly revenue was 75.277 billion euros, or about 1,126.5 trillion won, down 6.3 percent from a year earlier. Still, the deficit cannot be attributed only to low EV profitability. Goodwill impairment related to Porsche of 6.4 billion euros, along with asset impairments and restructuring costs in its China business, weighed heavily on results.

Special items for the first nine months of the year totalled 8.7 billion euros, or about 130.2 trillion won. Operating profit excluding them was 8.8 billion euros, or about 131.7 trillion won, but the operating margin was only 3.8 percent of revenue. Antlitz said it would be difficult to sustain future investment at current profitability and stressed the need for a swift and decisive response.

Growth potential in the EV business remains. As of the end of September, about 40 percent of the order backlog in Europe was for battery-electric vehicles, and about 150,000 orders poured in for a new lineup of affordable EV models to be introduced.

Volkswagen is pushing a cost-improvement programme worth a total of 31.0 billion euros, or about 464.0 trillion won, by simplifying its model lineup, improving production efficiency and cutting overheads. The assessment is that to use rising EV demand in Europe as a growth opportunity, it must improve manufacturing costs and profitability as well as expand sales. The company presented an outlook for this year’s full-year operating margin of up to 1 percent.