Volkswagen Group began 2026 on the back foot, reporting a 4% year-on-year decline in global deliveries for the first quarter as its two most important overseas markets — China and the United States — continued to drag on performance. The German automaker handed over roughly 2.05 million vehicles worldwide between January and March, weighed down by a 15% drop in China, a 20.5% plunge in the U.S., and a sharp pullback in battery-electric vehicle (BEV) sales following the wind-down of subsidy programmes in both markets. Steady growth in Europe and South America cushioned the blow but was not enough to offset the damage. Sales chief Marco Schubert framed the quarter as shaped by “very challenging economic and geopolitical conditions,” with competition from Chinese rivals, higher U.S. tariffs, and shifting regulations each playing a role.
Key Overview
- Global deliveries: Down 4% year-on-year to about 2.05 million vehicles in Q1 2026.
- China: Deliveries fell 15% in the quarter, with BEV deliveries collapsing 64%.
- United States: Deliveries sank 20.5% under the weight of tariffs and scrapped EV incentives; BEV volumes down 80%.
- Europe: Western Europe rose 4.2% and Central and Eastern Europe climbed 7.6%, with BEV share in Western Europe moving from 19% to 20%.
- South America: Deliveries grew 7%, led by 14.4% growth in Brazil.
- Premium brands: Porsche deliveries in China fell 21% and Audi dropped 12%.
- Strategic response: A wave of new, locally co-developed EVs is planned for China ahead of the Beijing auto show, while Škoda is exiting the Chinese market by mid-2026.
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A Weak Start to 2026 for Europe’s Largest Carmaker
Volkswagen Group, the Wolfsburg-based parent of brands ranging from VW and Audi to Porsche, Škoda, SEAT, and Bentley, said on Monday that its global deliveries fell 4% in the first three months of the year. In absolute terms, the group handed over roughly 2.05 million vehicles across all group brands between January and March — a drop that, while modest in percentage terms, widened the gap to global leader Toyota, which has steadily extended its lead since overtaking VW as the world’s largest automaker in 2020.
In its official statement from Wolfsburg, the company said it had “largely maintained its global market share” despite the decline, pointing out that the worldwide automotive market itself contracted through the end of March. That framing — shrinking in a shrinking market — is central to how VW is presenting the quarter to investors nervous about further erosion in China and the United States.
Sales chief Marco Schubert, who also oversees sales for Audi, said the quarter was “once again characterized by very challenging economic and geopolitical conditions,” adding that the automotive market was declining globally. His comments echo a broader mood across the European industry: Mercedes-Benz Group also reported a 27% drop in first-quarter sales, reinforcing the view that premium European brands are being squeezed on multiple fronts at once.
China: A 15% Drop and a Collapse in EV Volumes
China remains the single most important drag on Volkswagen’s numbers. Deliveries in the region dropped 15% year-on-year, with the group delivering roughly 618,900 vehicles across the quarter. That decline was especially severe in the electric segment: VW’s BEV deliveries in China fell by 64%, a drop the company attributed to the expiration of national EV subsidy programmes and the transition to a new generation of locally developed electric models that have yet to reach showrooms in volume.
The pressure is not confined to the mass-market VW brand. Porsche, long a profit engine for the group, saw its Chinese deliveries fall 21% in the quarter, while Audi was down 12%. German carmakers that once treated China as a near-automatic growth market are now fighting a defensive battle in a country whose consumers increasingly favour domestic electric brands.
The competitive landscape has shifted dramatically. Local players such as BYD and Geely have moved ahead of the German group in overall sales, capitalising on faster product cycles and aggressive pricing in a tech-driven EV market. Volkswagen Group chief executive Oliver Blume has publicly acknowledged the scale of the challenge, telling Bild am Sonntag that the group now faces “over 150 competitors and strong innovation dynamics” in China — a remark that quantifies just how fragmented and hostile the market has become for foreign incumbents.
There is a small silver lining: VW briefly reclaimed the top spot in Chinese sales in early 2026 as the reduction in EV subsidies cooled demand for pure-electric domestic brands. But few analysts expect that edge to last once subsidy-adjusted demand normalises and new BYD, Geely, and Xpeng launches land later in the year.
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Škoda’s Retreat Underlines the Scale of the China Problem
The clearest symbol of how deeply the Chinese market has shifted against VW’s European stable is the planned withdrawal of Škoda. The Czech brand — part of the Volkswagen Group since 2000 — will cease selling new cars in China by mid-2026, ending a presence that dates back to 2005.
The numbers tell the story. Škoda’s Chinese deliveries peaked at around 341,000 vehicles in 2018. By 2025, that figure had shrivelled to roughly 15,000 units, a decline of more than 95% that pushed the brand’s market share below 0.1%. Škoda said it will continue selling cars in China with a regional partner until the exit is complete and will maintain after-sales services for existing customers afterwards.
Škoda’s retreat follows Mitsubishi’s full exit in 2024 and mirrors what analysts describe as a broader survival crisis for foreign, combustion-focused brands unable to keep up with China’s rapid EV transition. Unlike Škoda, Volkswagen and Audi are choosing localisation over withdrawal, leaning on deeper partnerships with Xpeng and SAIC Motor to develop models tailored specifically for Chinese consumers. The ID.UNYX 08, the first jointly developed VW-Xpeng model, has already entered mass production, and Audi has begun pre-sales of the A6L e-tron, a mid-to-large luxury electric sedan aimed squarely at premium Chinese buyers.
United States: Tariffs and the End of EV Incentives
If China is VW’s structural problem, the United States has become an acute one. Deliveries in the U.S. plunged 20.5% in the first quarter, with the group handing over just 205,500 vehicles across North America — a 13.3% decline for the wider region compared with a strong prior-year period.
Two policy shocks explain most of the damage. First, the higher tariffs imposed by the Trump administration — in effect since April 2025 — have raised the landed cost of VW’s imported vehicles and compressed margins on those it builds domestically using imported components. Second, the outright repeal of federal electric vehicle incentives has gutted demand for BEVs: Volkswagen’s U.S. electric deliveries fell roughly 80% in the quarter.
The response has been swift. On Friday, the group announced it would cease production of the ID.4 electric SUV in the U.S. and refocus its Chattanooga plant on combustion-engine Atlas-type SUVs — a striking reversal for a company that had positioned the ID.4 as the spearhead of its American electrification strategy. The decision illustrates how quickly product plans are being rewritten in response to shifting U.S. policy signals.
Europe and South America Provide a Partial Cushion
Volkswagen’s home region continues to act as a stabiliser. In Western Europe, deliveries rose 4.2%, and Central and Eastern Europe grew 7.6%. Germany itself was up 4.8%. Across the combined European region, the group handed over 983,800 vehicles — a 4.7% increase versus the same period last year.
Electric vehicle demand in Europe told a different story from China and the U.S. VW’s BEV deliveries in Europe grew 11.5% to 176,400 vehicles, order intake for pure electric cars rose 4%, and the BEV share of Western European sales nudged up from 19% to 20%. The group remains the clear BEV market leader in Europe, and executives are counting on the upcoming Electric Urban Car Family — a line of smaller, lower-priced electric models — to sustain that momentum through the rest of the year.
South America offered additional relief. Deliveries in the region rose roughly 7%, helped by a 14.4% jump in Brazil, where VW remains one of the most entrenched brands and where macroeconomic conditions have proven more favourable than in the group’s other overseas markets.
A Strategic Recalibration Under Pressure
The Q1 2026 numbers land at a moment of deep structural change for Volkswagen. The group’s full-year 2025 results showed net profit falling around 44%, from €12.4 billion to €6.9 billion, on essentially flat revenue of roughly €322 billion. Management attributed the profit collapse to tariff-related cost increases, Chinese competitive pressure, and ongoing portfolio restructuring costs — the same forces now shaping the 2026 numbers.
Ahead of the Beijing auto show later this month, Volkswagen is staking its Chinese recovery on a wave of new EVs co-developed with local partners. Audi is pressing ahead with its A6L e-tron launch and experimenting with a sub-brand stripped of the iconic four rings, though the debut E5 Sportback has sold only around 7,070 units since deliveries began in August 2025 — a reminder of how hard it is for foreign brands to engineer fresh starts in a market moving this fast.
In Europe, the strategy is continuity plus electrification: more small EVs, more software, and more scale. In the United States, the near-term move is defensive — leaning into combustion-engine SUVs where tariff economics still work — while management waits to see whether the regulatory environment settles.
The Bottom Line
A 4% decline in quarterly deliveries, against a global market that is itself contracting, is not a catastrophe for a group of Volkswagen’s scale. But the composition of the decline — a 15% drop in China, a 20.5% plunge in the U.S., and a brutal contraction in BEV sales in both markets — tells a more uncomfortable story about how quickly VW’s two biggest overseas profit pools have deteriorated. European growth, Brazilian strength, and a pipeline of locally developed Chinese EVs give management something to point to. Whether that is enough to stabilise deliveries before full-year 2026 numbers are finalised will depend, in Schubert’s words, on navigating a set of “very challenging economic and geopolitical conditions” that show no sign of easing.
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