VW's 1 Millionth Electric Vehicle Arrives, Yet It's Outpacing Expectations | Carscoops

      Smaller profit margins on electric vehicles are being cited as the reason for a 40 percent decrease in earnings in the first quarter.

      VW is commemorating the production of its 1 millionth electric vehicle, an ID.3 GTX.

      Electric vehicle sales in Europe saw a twofold increase during the initial three months of 2025.

      However, EVs are less profitable and have played a role in the reduced earnings.

      Party hats were mandatory at VW’s Zwickau factory in eastern Germany this week. This facility manufactures six different electric vehicles for various VW Group brands and has just produced its millionth electric car, an ID.3 GTX hot hatch. However, the busy assembly lines at Zwickau are causing financial concerns for the accountants at VW’s Wolfsburg headquarters.

      The issue lies in the fact that EVs are costly to manufacture and yield smaller profit margins compared to their combustion engine counterparts. While the doubling of electric vehicle sales in Europe during the first quarter of 2025 is a positive development, some of these sales have come at the cost of internal combustion engine sales.

      As electric vehicles comprise a larger share of the sales mix—accounting for one-fifth of VW Group cars from January to March—they are driving down profitability, leading to a margin reduction to 4 percent. Additionally, the removal of EV subsidies in many European nations means VW cannot rely on government incentives to justify higher pricing.

      Yet, there is optimism with the upcoming VW ID.2 and its various derivatives. The €25k ($28k) ID.2, set to be produced in Spain, is expected to launch in 2026 and may be among the first Western-made EVs to achieve profit margins similar to those of combustion engine vehicles. The ID.2, along with its related SUV, the Cupra Raval, and Skoda Epiq, will utilize a new front-wheel-drive version of the MEB platform that is less expensive to manufacture.

      Earlier this month, VW announced that earnings before tax dropped 40 percent to €3.1 billion ($3.5 billion) in the first quarter, despite a 1.4 percent increase in deliveries. The company's finance chief, Arno Antlitz, attributes part of this decline to the growing share of EVs in their sales.

      Moreover, President Trump’s tariffs pose an additional challenge to VW Group’s plans. The shifting landscape of US import tariffs complicates financial forecasting for the remainder of the year, causing VW, which is significantly affected due to Audi and Porsche lacking US production facilities, to lower expectations for a less profitable year than previously forecasted.