German automotive company sees another profit plunge. Electric vehicles on the verge of profitability

The German automotive company Volkswagen reported revenues of EUR 80.8 billion in the second quarter, which means a year-on-year decrease of approximately 3%.

Net profit amounted to €2.3 billion, down 36.3% compared to the same period last year. This is the sixth consecutive quarter of declining profits.

During this period, the operating margin declined to 4.7%, primarily due to limited demand for luxury cars from Bentley and Lamborghini, as well as the most expensive Porsche and Audi models. Skoda, a premium brand offering competitively priced cars, is performing best in the market.

Electric car sales are currently on the verge of profitability

The group's problem is the very low profitability of electric car sales , given the huge competition from Chinese manufacturers, which makes it necessary to pursue an aggressive promotional policy towards potential customers.

An additional problem is the decline in sales in the second largest market, which was previously China, and high import tariffs introduced in the United States.

As tariffs are likely to remain a persistent burden, the group will need to redouble its cost-cutting efforts to mitigate their negative impact in the near future.

The federal government raised tariffs on passenger car imports from the previous level of 2.5 percent to 27.5 percent. This resulted in a 16.9 percent drop in deliveries to this market in the second quarter.

Volkswagen also faces the imposition of high tariffs on imports from Mexico. With factories in that country, the group isn't achieving the expected results, and the only solution may be to produce in American factories.

Volkswagen is waiting for the EU-US customs dispute to end.

However, until the dispute between the United States and the European Union over the level of tariffs imposed on mutual trade is resolved, no strategic action will be taken.