Volkswagen's profits fall 40% over US tariffs, missing EU carbon emission targets

The tariff impact came about since most of the brand's US sales is cars made in Mexico, with its Audi and Porsche brands also having no US manufacturing bases.

Volkswagen's first-quarter profits fell as much as 40 per cent due to penalties of missing European Union (EU) carbon emissions targets and also because of US tariffs.

A Volkswagen logo is pictured at Volkswagen's headquarters in Wolfsburg, Germany. (Reuters)

As a result, the operating profit for the period was €2.8 billion, which is down from €4.6 billion a year back, and “significantly” below market expectations, according to a Bloomberg report.

The tariff impact came about since the bulk of the brand's US sales is cars made in Mexico, with its Audi and Porsche brands also having no US manufacturing bases.

Things turn optimistic

However, there is some positive news for both these factors.

When it comes to the emission standards in Europe, the European Commission has now proposed to loosen the rules which most of the industry is likely to breach this year, leading to billions of euros in fines, according to a report by news agency Reuters.

Though this is yet to approved by the European Parliament, it can give Volkswagen and the rest of the industry more time to boost sales of electric vehicles.

This, combined with a recently announced 90-day tariff pause by Trump, Volkswagen's shares were up 8.2 per cent. However, a 25 per cent tariff on autos imports still are in place and it heavily affects Volkswagen.

Europe's autos index was also up 4.9 per cent, while a wider European index rose 7.9 per cent, according to the report.

Volkswagen had also included a €600 million provision for potential fines in its first-quarter result, as well as €200 million euros for restructuring its software unit Cariad, which is now in the midst of layoffs.