Risks and opportunities from the macroeconomy, the sector, markets and sales
For this risk category, the likelihood of occurrence is classified as high (previous year: high) and the potential extent of damage is classified as medium (previous year: medium).
The most significant risks from the QRP arise from a negative influence on markets and unit sales driven among other factors by trade restrictions, increasing protectionist tendencies and intensifying competition.
Macroeconomic risks and opportunities
The demand for and sales volume of our products and services depends upon the general global economic situation.
Risks to the global economy and stability can arise from a global turn away from globalization and the increasing fragmentation of the global economy, volatilities in financial, energy and commodity markets and increasing geopolitical and geoeconomic tensions and conflicts as well as fundamental business cycles. Political uncertainty, primarily due to changed political priorities, protectionist measures, structural supply and demand deficits also pose a threat to the development of individual advanced economies, emerging markets and other regions. Economic growth and developments in advanced economies and emerging markets can also be directly or indirectly affected by regional and global conflicts. Relevant influencing factors include geopolitical confrontations such as the Russia-Ukraine conflict or the confrontations in the Middle East, security-related events such as terrorist attacks and cyberattacks, health challenges due primarily to the spread of infectious diseases and structural changes such as demographic developments. The impact on economic developments can vary from region to region. Economies react differently to external influences depending on their structure, geopolitical situation and global interdependence. Distortions in the global economy, increasing volatilities in the financial, energy and commodity markets and increasing migration movements can be possible consequences. In addition, individual markets may show higher price sensitivity, which are attributable to changed supply and demand conditions as well as increased uncertainties. Changes in monetary policy, structural deficits or high levels of public and private debt can also adversely affect economic growth.
Stagnating economic growth or economic downturns or disruptions, especially in countries and regions with high economic relevance to the global supply chain and interdependence, such as the US and China, can have a direct impact on the global economy and thus pose a significant risk to our business, and lead to, among other things, intensified price competition, rising inventories, increase in tied-up capital and excess capacity in production.
Rising protectionist tendencies in any of our key markets, the introduction or extension of tariff and non-tariff barriers, minimum content requirements or other similar measures as well as the withdrawal from existing free trade agreements, may exacerbate the above-described macroeconomic risks. Direct or indirect trade tensions between the US, Canada, Mexico, the EU and/or China, a reorientation of the economic policies of countries that represent our key markets, for example as part of an effort to strengthen their domestic businesses or manufacturing bases, have had and could continue to have adverse effects on us. In particular, we are exposed to the potential intensification of ongoing trade disputes as a result of, among other things, existing, as well as abruptly introduced, trade tariffs imposed by the US and retaliatory measures by other countries. Trade disputes, tariff volatility and uncertainty and other geoeconomic pressures, such as sanctions, trade restrictions, investment controls or currency interventions, expose us to unpredictable costs, supply chain disruptions and compliance challenges. Such measures have in the past and could in the future target specific sectors and products, including the automotive sector. Existing and prospective US tariffs and non-tariff barriers adversely impact US sales of vehicles produced by us in other jurisdictions, including Europe.
Any future potential armed international conflict or any escalation in tensions in our key markets, such as the US and China or a direct confrontation of foreign powers with NATO member states, should they occur, are likely to have a significant adverse effect on the Volkswagen Group.
Overall, we expect the global economy to grow in 2026. However, primarily due to the risk factors mentioned, as well as cyclical and structural aspects, a slump in global economic growth or a period of below-average growth rates is also possible.
The macroeconomic environment could also present opportunities for the Volkswagen Group if actual developments turn out to be more positive than expected.
Competition in the Automotive Industry
We operate in highly competitive global automotive markets and we anticipate that this competition will continue to intensify, resulting in sustained pricing pressure and an increased use of sales incentives by market participants.
The automotive industry will continue to undergo significant transformation in the coming years due primarily to ongoing vehicle electrification, digitalization and new technologies. The competitive environment is increasingly shaped by new business models (e.g., Mobility as a Service, Transportation as a Service, car sharing), products (e.g., autonomous driving) and new market participants. For the Volkswagen Group, as a provider of both volume and premium models, the heightened competitive intensity and resulting price pressure represent a risk.
Competitive pressure may arise from the market entry of new manufacturers – particularly from China, the United States, or India – an expansion of production by established manufacturers, or government regulations. This will particularly affect automotive markets in Western Europe, the United States, China, Brazil and India. Competitors may also increasingly seek to serve the Western European market with spare production capacity or new product offerings tailored to European consumers.
Exposure to key markets
A significant percentage of vehicle sales of the Volkswagen Group is attributable to our key markets such as Western Europe, particularly in Germany, and China and we are exposed to risks stemming from deteriorations in economic conditions and financial markets in these regions, which have led to declines in demand in the past and could do so again in the future.
A sustained decrease in demand for our products and services in our key markets, or intensified competitive pressure, has required us to adjust production capacity in these regions and may continue to do so. This could lead to additional costs, one-off expenses, or otherwise reduced profitability.
Our future growth plans significantly also depend on the market development in China. The highly competitive Chinese market environment continued to negatively impact our deliveries in 2025. China’s automotive market is fiercely contested, with numerous domestic and foreign manufacturers seeking to maintain or grow market share through tactical measures. Competition is especially intense in the battery electric vehicle segment. Many Chinese customers currently also prefer domestic manufacturers due to their more locally customized digital service offerings.
An economic slowdown or new, adverse government measures – such as ending subsidies, the introduction of or increase in trade duties, or introducing quota regulations for New Energy Vehicles (e.g., battery electric vehicles and plug-in hybrids) – could weaken demand for automobiles. Additionally, restrictions on vehicle registrations in metropolitan areas such as Beijing, Shanghai and Guangzhou could be extended to other major cities, impacting our deliveries in China.
A sharp decline in demand for vehicles in our key markets – caused by changes in customer behavior, price adjustments, changes in investment activity or economic conditions, intensified competition or political and armed conflicts – would have a particularly strong impact on our earnings, including those of our financial services business.
Growth potential in key markets of Volkswagen Group
The Volkswagen Group embraces growing international competition, including from China, and views it as an opportunity that benefits our customers.
To secure our market share and future success in existing and new markets, it is essential, that we are able to respond to changing customer preferences, especially regarding electric mobility. During this transformation phase, a flexible powertrain offering is essential, as regions worldwide are developing at different speeds. With our broad product portfolio we can meet demand: customers can choose between efficient combustion engines, fully electric models, or high-performance hybrid powertrains.
China
Vehicle demand in China is expected to continue rising in the coming years, driven by the ongoing need for individual mobility. This trend extends to the rapidly expanding e-mobility market, which is currently led by high-volume domestic manufacturers, among others. In addition, demand is expected to shift from major coastal metropolitan areas to the country’s interior, accompanied by intensifying competitive pressure from local manufacturers. We are continuously expanding our product portfolio with models specifically developed for this market, aiming to participate in the opportunities this market offers – particularly with regard to e-mobility. To this intend, we are increasingly entering into partnerships to better meet regional customer requirements.
USA
In the US market, the share of light trucks – particularly SUVs and pickups – is expected to continue to increase slightly in the coming years. Overall, as in other markets, the electrification of mobility is strongly influenced by government incentives and regulatory requirements for fleet emissions and fuel consumption. However, changes in government administrations can repeatedly lead to policy shifts.
Under the current administration, for example, there is a significant rollback at the federal level of government purchase incentives for electrified vehicles, as well as the elimination of fuel efficiency standards. A substantial relaxation – or even complete removal – of CO2 emissions requirements is being pursued.
Volkswagen Group of America is consistently pursuing its strategy to establish itself as a full-scale volume supplier and expanding its market share. The expansion of local production capacity – including electric vehicle manufacturing since 2022 – enables the Volkswagen Group to better serve the North American market. We are also actively developing additional products tailored to US consumer preferences, including a full-size pick-up and a robust SUV, to capture the electric and hybrid vehicle market with the US brand Scout.
Risks in our growth markets
In addition to our performance in our key markets, our commercial success depends on our own and our competitors’ efforts in growth markets in Asia, North America, South America and Central and Eastern Europe. We already have a strong presence in numerous established and emerging markets or are pursuing to increase market share.
We have made substantial investments in these growth markets and intend to continue doing so. However, prevailing conditions in these markets could make it more difficult to increase sales volumes. Examples include requirements regarding the share of local production, minimum requirements for homologation and vehicle registrations, import restrictions such as potential bans on certain foreign components and software solutions, as well as other trade barriers, which currently represent a potential challenge in the United States. As a result, it could not be possible to achieve a return on investment in these markets at all or only later than planned.
Several competitors, particularly larger Asian manufacturers, are expanding their production capacities in these markets to meet local demand. Asian – especially Chinese and Indian – manufacturers are increasingly exporting to emerging regions outside their home markets. This further intensifies competitive pressure on the products and services of the Volkswagen Group.
Opportunities in our growth markets
India
India represents a significant future market for us, with demand for new vehicles expected to rise in the coming years, partly as a result of demographic changes. The Volkswagen Group has consolidated its operations in India and offers a range of models tailored to local customer preferences, including the Virtus and Taigun from the Volkswagen Passenger Cars brand, as well as the Škoda Kushaq, Slavia and Kylaq.
Brazil
In Brazil, the demand for individual mobility and demand are expected to increase slightly in the coming years, particularly in the low-price, small-vehicle segments. Given the presence of trade barriers, local production remains a key factor for competitiveness. To strengthen our competitive position in Brazil, we offer vehicles specifically designed for this market and produced locally, such as Polo and Polo Track, T-Cross, Saveiro, Nivus or the new Tera.
Local content requirements
Local content requirements may expose us to compliance risks, competitive disadvantages and investment uncertainty.
Certain governments are implementing, or have proposed, regulations requiring that a specified portion of a vehicle’s components, subcomponents (such as semiconductors) or value be sourced or manufactured domestically or regulations imposing restrictions on the use of components and/or subcomponents imported from specific countries. Compliance with these requirements is often a prerequisite for vehicle homologation, registration, participation in public procurement processes or access to government incentives, subsidies, or tax benefits.
Local content requirements add complexity to our supply chain management, thereby increasing the risk of supply chain disruptions. We may be urged to engage with a restricted pool of local suppliers, some of whom may face challenges such as meeting competitive pricing, which potentially results in increased production costs and reduced competitiveness relative to established domestic manufacturers.
In addition, compliance with such regulations as a matter of course for us may lead to higher operational costs. On the other hand we are exposed to the risk of penalties for non-compliance. Local content mandates can also trigger trade tensions and retaliatory measures under international agreements, while frequent changes or lack of clarity in these regulations may create investment uncertainty and impede effective long-term business planning for us and also our suppliers.
On the other hand, local content quotas offer opportunities, for example to develop alternative sources of supply more quickly.
Customer demand
A decline in purchasing power could significantly affect our business.
Lower disposable income or weakened financial conditions among consumers typically result in reduced vehicle sales. A decline in purchasing power can be caused by increasing unemployment levels, rising inflation and interest rates and similar adverse economic developments. Other factors negatively impacting demand include financing costs, customer dissatisfaction with existing vehicles and shifts in mobility trends or infrastructure, such as increased car sharing and transportation services.
Changes in consumer sentiment or media coverage of the global economy and financial markets – including shifts in unemployment, inflation, interest rates, income and personal wealth – may lead to declines in demand for automobiles that are not directly correlated with underlying macroeconomic factors. Concerns about the economy can deter potential customers, especially in saturated markets like Western Europe, from purchasing or leasing new vehicles and retain their current cars longer or lead them to opt for cheaper models.
The macroeconomic environment and consumer sentiment risks described above can also negatively affect used vehicle resale or the price levels in the used car market. This could have a negative impact on the profitability of the used car business in Volkswagen’s dealer organization including Volkswagen’s Financial Services Division.
The Volkswagen Group believes it is well positioned with its broad portfolio of products and drive systems, as well as its target-group-focused customer care and thereby insulated from the risk of default of individual fleet customers or markets. The consistently high market share in Europe shows that fleet customers have confidence in the Volkswagen Group.
Brand overlap
With our diverse brand portfolio, it can be difficult to clearly differentiate between the individual brands in the Volkswagen Group, especially where customer segments or product portfolios overlap. These overlaps can lose the distinctiveness of a brand and make it difficult for customers to differentiate between them. This brand convergence can trigger internal competition, which means that different Group brands may compete for the same customer base. This could lead to cannibalization and dilution of the respective brand value.
In addition, jurisdictional or regulatory constraints may occasionally limit brand deployment in certain markets. We are closely monitoring such developments and adapting our strategies accordingly to work towards planned and compliant market entry.
Enhancing brand differentiation and broadening brand perception require dedicated marketing initiatives and investments. Through targeted positioning strategies and the continuous refinement of our brand identities, we are actively working to strengthen the distinctiveness of each brand. While these efforts may involve higher marketing costs and repositioning expenses, they are designed to reinforce long-term brand equity and overall Group value.
Overall, the Volkswagen Group pursues a proactive approach to minimising the risks of brand overlap and securing a clearly structured brand architecture – thereby reinforcing the Group’s long-term competitiveness and business resilience.
Corporate customers
The vehicle business with corporate customers is important to us, so we are also dependent on their economic situation and preferences.
Viewed over an extended period, the corporate customer business is more stable than the business with retail customers. Corporate customers need vehicles to travel, distribute their goods and services and visit their customers. They rely on cars, light commercial vehicles, trucks and buses for their daily work and in most cases, they provide a specific budget for the acquisition of the vehicles. By representing approximately half of our registrations in Europe during any given year, fleet registrations for passenger vehicles highlight the importance of these customers to the Volkswagen Group.
While the Volkswagen Group does not depend on any individual corporate customer, the segment is important, making us exposed to risks related to the economic health of these customers. Corporate demand for vehicles primarily depends on the financial health of these customers, their investment outlook and access to financing, satisfaction with existing products and evolving mobility trends and infrastructure. Economic downturns may cause corporate customers to delay or reduce vehicle purchases or leases, impacting our sales.
Furthermore, the corporate customer business is experiencing increasing concentration and internationalization, meaning that the loss of a relatively small number of corporate customers could still result in a significant decrease in vehicle sales.
Corporate customers tend to include CO2 restrictions in relation to exhaust emissions into their company policies. There is a risk that corporate customers will reduce or eliminate purchases of our products if we are not able to offer products with sufficiently low exhaust emissions values. Additionally, corporate customers have been and continue to be increasingly interested in battery electric vehicles, new forms of mobility as well as mobile online services, as they seek to comply with fleet emission requirements as well as internal ESG policies. There is a risk that we could lose sales if our transformation towards e-mobility or other new mobility concepts does not proceed in a timely manner.
The Volkswagen Group believes it is well positioned through its extensive portfolio of products and drive systems, alongside customer care tailored to specific target groups. This approach mitigates the concentration of default risks among individual fleet customers or specific markets. The Volkswagen Group’s consistently high market share in Europe demonstrates the continued confidence of fleet customers in its offerings.
Changing consumer preference
Changing consumer preferences with respect to the choice of modes of transportation could limit our ability to sell traditional product lines at current volume levels.
The size, performance and accessory features of our passenger cars and light commercial vehicles, as well as market-specific functions, have a direct impact on our profitability. For example, larger vehicles from higher-quality segments typically contribute more to operating results than smaller or lighter equipped vehicles or those of more affordable segments.
Rising demand for fuel-efficient vehicles such as hybrid and electric models requires smaller, more efficient engines that are comparatively costly and technically challenging to develop. Competitive market conditions have in the past and could in the future limit our ability to offset rising costs through pricing adjustments, potentially impacting our profitability. Furthermore, stagnating interest in hybrids and electric vehicles could negatively impact our carbon dioxide (CO2) fleet balance, potentially resulting in higher costs to meet the CO2 regulatory requirements set in certain jurisdictions.
Due to growing urbanization, we see a sustained shift in mobility patterns, with both private and commercial customers showing a growing inclination toward alternative transportation solutions over privately owned vehicles. A shift in consumer preferences or government policies away from motorized transport in urban areas or a broader trend towards smaller vehicles and alternative drivetrains, could result in decreased demand for a portion, or all, of our vehicles.
We counter this risk by constantly developing new, fuel-efficient vehicles and alternative drive technologies, based on our drivetrain, fuel and mobility strategies.
Risks arising from government interventions
Demand for our products, in particular hybrid and electric vehicles, is driven to a certain extent by government, tax and other third-party and other environmental incentives promulgated, which may be reduced or terminated at any time.
Automotive markets globally are subject to risks arising from government interventions, including tax increases that curb private consumption, as well as from trade restrictions and protectionist measures – particularly those occurring in the United States and in the form of sanctions. Additionally, our business may be impacted by changes to or the introduction of new free trade agreements. Any amendments or increased restrictive conditions in such agreements could disadvantage us compared to competitors with production facilities in countries benefitting from such agreements. Furthermore, in this context there are prospective risks associated with the sale of electrified vehicles if minimum local content requirements under free trade agreements are not met. Moreover, our reliance on existing free trade provisions poses risks. The use of sales incentives could result in shifts in the timing of demand creating uneven sales.
Government sales incentives could target market segments which are not beneficial for us, potentially reducing our vehicles’ appeal to customers. For example, due to political changes, governments may no longer target demand stimulus for electric and hybrid vehicles through direct incentives, tax and other third-party incentives either partially or at all, and may even adopt policies that have the effect of disfavoring electric and hybrid vehicles. Furthermore, governments may introduce other conditions or pre-requisites (e.g. transparency and supply chain due diligence, local content requirements, Diversity & Inclusion obligations) in order to qualify for such stimulus or incentives which we may not be able to comply with.
Further, special sales incentives and increased price pressures in the new car business also influence price levels in the used car market.
Commercial vehicle demand
Key factors for commercial vehicle customers are total cost of ownership, vehicle reliability and the service provided.
Commercial vehicle demand is highly sensitive to economic shifts, requiring manufacturers to adapt quickly to fluctuating transport needs and are capital-intensive goods, and customers may delay or reduce purchases during periods of economic or regulatory uncertainties. Production volumes for trucks and buses are lower than for passenger cars and their technical complexity is significantly higher, which increases manufacturing costs and operational challenges. This complexity might limit our ability to scale production efficiently in response to fluctuating demand. In addition, the capital-intensive nature of commercial vehicles makes inventory management and capacity planning more difficult, potentially leading to underutilized resources or supply chain inefficiencies.
Additionally, global freight delivery may shift from trucks to other modes, reducing demand for Group commercial vehicles.
We address the resulting risk of production fluctuations by a high degree of flexibility.