German auto giant Volkswagen has announced one-time charges of €10 billion, equivalent to roughly $11.5 billion. The bulk of the write-downs stems from troubles at the Porsche brand, weakening demand in China and intensifying competition from local automakers, according to infohub.kz.

About €6 billion of the charges are tied to a revision of Porsche's medium-term forecasts; Volkswagen owns 75% of the sports car maker. Porsche has faced a string of problems: US tariffs, falling demand for foreign premium cars in China and low profitability. Last year, its margin was just 1.1%. As sales deteriorated, Porsche has already begun shrinking its dealership network in the People's Republic of China.

One of the biggest threats to Volkswagen has been the rapid rise of Chinese automakers. They are capturing market share not only within China but also actively expanding their presence in Europe. Chinese companies offer more affordable electric vehicles and bring new models to market faster. As a result, Volkswagen must simultaneously cut prices, speed up EV development and rethink production volumes.

In 2024, the German group lost its status as the largest automaker in China. It now plans to cut production in the world's largest auto market by about 20%.

"We don't have time to lose," Volkswagen CFO Arno Antlitz said in an internal memo seen by Reuters. Among the main threats, he cited Asian competitors' push into the European market and rising sales of less profitable electric vehicles. "There are no signs of consolidation. We won't be able to avoid this trend," Antlitz added, commenting on the situation in China.

The group now expects its operating margin for 2026 to be no higher than 1%. Volkswagen had previously forecast a range of 4% to 5.5%. Analysts on average had expected 4.1%. The company warned of further deterioration in the market, especially in China, as well as an accelerated shift by buyers to electric vehicles. As a result, Volkswagen lowered its forecasts for passenger cars under the Audi and Volkswagen brands.

The warning came two weeks after Volkswagen agreed with shareholders on a major transformation plan. It calls for cutting another 50,000 jobs, simplifying the group's structure and possibly closing plants. This will be the largest restructuring in Volkswagen's history.

After the new forecast was published, Volkswagen shares fell 5.6%, Porsche dropped 3.3%, and the group's largest shareholder, Porsche SE, declined 4.9%.