Volkswagen Q1: Profits Tumble as Management Looks to Defense and Energy Trading

Volkswagen heads into its annual shareholder meeting next month carrying the weight of a 28.4% drop in first-quarter net profit, a tentative foray into the defense industry and the promise of selling electricity back to the grid. The convergence of bad earnings, unorthodox diversification and an activist shareholder motion demanding the board be denied discharge sets the stage for a pivotal gathering in June.

First-quarter net income fell to €1.564 billion, while operating profit slipped 14.3% to €2.463 billion on revenue of €75.66 billion, down 2.5% from a year earlier. Special charges weighed heavily: €0.5 billion from the end of ID.4 production in the United States, €0.3 billion tied to restructuring and €0.6 billion attributable to US tariffs. Stripping those out, the operating margin would have been 4.3% rather than the reported 3.3%. Global vehicle sales dropped 7%, with China plunging 20% and North America falling 9%.

For the full year, management is guiding for revenue growth of 0% to 3% and an operating margin of 4.0% to 5.5% — a range that implies no quick recovery from the first-quarter weakness.

A New Revenue Stream: Selling Power to the Grid

One bright spot that has little to do with traditional carmaking is Vehicle-to-Grid (V2G). Starting in the fourth quarter of 2026, owners of VW electric vehicles will be able to let their cars trade electricity on the EPEX spot market through the group’s energy brand, Elli. The service — including vehicle, app, dynamic tariff, smart meter, bidirectional wallbox and installation — promises annual savings of €700 to €900. Pre-registration opens in June. All ID. models built since 2023 already support bidirectional charging, and a regulatory change in 2026 that eliminated double grid fees has finally made the model economically viable.

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The V2G initiative offers an alternative narrative to the cost-cutting story that currently dominates. CEO Oliver Blume confirmed that the group is also holding talks with the defense industry about using factory capacity for military production — a move far beyond Volkswagen’s traditional automotive remit. No concrete projects have been disclosed, but the logic is industrial: underutilized plants drive up per-vehicle costs, and any additional use of manufacturing expertise could help stabilise the fixed-cost base.

Deeper Austerity and a Strategic Tech Bet

The pressure to find new uses for factory capacity stems from a sweeping restructuring plan. By 2030, Volkswagen intends to cut roughly 50,000 jobs in Germany, primarily through socially acceptable measures such as early retirement. The aim is to improve the operating margin and free up funds for future investment.

Parallel to the headcount reduction, the group is deepening its software partnership with US startup Rivian. Their joint venture, RV Tech, now employs more than 1,500 people and is preparing reference vehicles for winter testing. Software-defined vehicles remain a well-known weakness for traditional automakers, and a successful Rivian collaboration could narrow the technological gap.

In China, the pressure remains intense. Volkswagen is pursuing its “In China, for China” strategy, planning to launch more than 30 new electric models in the coming years as local rivals race ahead on speed, price and software sophistication.

Technical Picture and the Shareholder Vote

None of these initiatives has yet lifted the shares. The preference stock closed at €87.98, having lost 3.30% on the week and 17.13% year to date. The 200-day moving average sits at €95.66 and the 50-day average at €88.66, while the relative strength index of 43.4 signals neither overbought nor oversold. The 52-week low of €83.22 is just 5.7% below the current price, leaving little margin for error.

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At the annual general meeting in June, shareholders will vote on a dividend of €5.26 per share, equivalent to a yield of roughly 6% at the current price — a powerful argument for income-focused holders. But an opposing motion from individual shareholders seeks to deny the board’s discharge, arguing that the management failed to correct the strategic course sufficiently during the 2025 fiscal year. The weak first-quarter numbers are likely to amplify those voices.

Ultimately, the stock remains in a waiting zone. The defense and V2G projects can generate narrative interest, but investors will need clear evidence of cost reduction and improving margins before they reward the direction. The AGM will be an early test of whether Blume can turn talk into measurable progress.

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