Volkswagen 1Q operating profit may come in slightly below expectations; Goldman Sachs maintains Neutral and lowers target price to €97

Overview

This report is Goldman Sachs' earnings preview and valuation update on Volkswagen. The core view is that 1Q26 deliveries came in slightly below market expectations, but the core brands still achieved year-on-year growth excluding China, and revenue may come in slightly above investor expectations; however, the earnings side is weighed down by €450mn related to tariffs and the ID.4 discontinuation, and group operating profit is expected to be below consensus. Goldman Sachs maintains a Neutral rating and lowers the 12-month target price from €99 to €97.

Core views

Goldman Sachs believes Volkswagen is improving its long-term competitiveness through cooperation with XPeng in China, cooperation with Rivian in the U.S., and ongoing cost measures, but the near-term investment case still needs more evidence of sustained improvement in underlying earnings. 1Q26 operating profit is expected at €2.64bn, 6.8% below Visible Alpha consensus; group revenue is expected at €77.94bn, 1.5% above consensus. The ID.4 discontinuation, tariff burden, and weak EV demand are sources of short-term earnings pressure; a potential Everllence sale is an important point to watch for cash flow and execution in disposing of non-core assets.

Analysis framework

The report combines the company's disclosed 1Q26 delivery data, Goldman Sachs' in-house earnings forecasts, Visible Alpha consensus, business-segment forecasts, and a P/E valuation method to assess Volkswagen's short-term earnings variance, future EPS changes, cash flow events, and target price implications.

Methodology notes

• Valuation methodsP/E Valuation Method

  Derive the 12-month target price based on 2027E EPS and target price-to-earnings multiple

  Goldman Sachs applies a 4.0x target P/E to 2027E EPS. This multiple is consistent with the valuation methodology for European mass-market auto peers, resulting in a 12-month target price of €97.

• Forecast ComparisonGSe vs Visible Alpha Consensus

  Comparison of Goldman Sachs forecasts with market consensus

  The report compares Goldman Sachs' forecasts for 1Q26 and 2026-2028 revenue, operating profit, margin, EPS, and automotive cash flow with Visible Alpha consensus to judge whether results may come in above or below market expectations.

• Factor FrameworkGS Factor Profile

  Assessment of growth, financial returns, valuation multiples, and composite percentiles

  Goldman Sachs' factor framework uses metrics such as forward revenue growth, EBITDA growth, EPS growth, ROE, ROCE, CROCI, as well as P/E, P/B, dividend yield, and EV/EBITDA to measure a stock's relative position versus the market and industry peers.

• M&A FrameworkM&A Rank

  Probability score of being acquired

  Goldman Sachs classifies covered companies into M&A probability ranks of 1 to 3, where 1 represents high probability, 2 medium probability, and 3 low probability; Volkswagen's M&A Rank is 3 and is typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Volkswagen (VOWG-P.DE)

  Core covered asset

  Strengths

  Diversified business mix, with core brands, luxury brands, truck and financial services divisions; advancing cost initiatives and strategic partnerships; relatively high forecast dividend yield.

  Weaknesses

  Short-term operating margin is relatively low, with earnings dragged by tariffs, the ID.4 discontinuation, weak EV demand, and pressure in the China business.

  Comparison

  Goldman Sachs values it under the European mass-market auto peer framework at a 4.0x target P/E; the rating is positioned relative to the coverage group including Aston Martin, BMW, Ferrari, Mercedes-Benz, Porsche AG, Renault, and Stellantis.

  Risks

  Software and BEV production issues, supply-chain constraints, commodity and energy prices, geopolitics, slowdown in China, and competition and pricing pressure.

• ID.4

  Source of short-term earnings drag

  Strengths

  Part of Volkswagen's EV product line and previously supported its U.S. EV positioning.

  Weaknesses

  The U.S. demand environment is challenging, recent profitability is low, and the production discontinuation at the Chattanooga plant is expected to create a €450mn drag.

  Comparison

  Relative to the upcoming Atlas and potential new models, the ID.4 shows weaker consumer demand and profitability in the U.S. market.

  Risks

  EV demand recovery falls short of expectations, insufficient improvement in the BEV cost curve, and discontinuation-related costs exceeding expectations.

• Everllence

  Potential asset sale and cash flow event

  Strengths

  If a partial sale succeeds, it could generate cash flow and validate management's execution in disposing of non-core investments.

  Weaknesses

  The report has not yet incorporated the potential sale into FY26 automotive net cash flow forecasts, and the outcome remains uncertain.

  Comparison

  Viewed as an important precedent in Volkswagen's approximately €24.6bn non-core investment disposal plan.

  Risks

  Transaction delays, lower-than-expected valuation, or a failed sale could weaken expectations for cash flow and governance improvement.

• Porsche AG与Traton SE

  Holdings or subsidiary factors related to estimate revisions

  Strengths

  Important components of Volkswagen's valuation and earnings forecasts, with the Trucks division forecast revised up meaningfully versus the prior forecast.

  Weaknesses

  After incorporating the latest estimates for Porsche AG and Traton SE, Volkswagen's overall EPS forecasts are still revised down.

  Comparison

  Segment performance is diverging, with Brand Group Trucks operating profit forecast revised up, while Sport Luxury and Core face pressure in some years.

  Risks

  Luxury vehicle demand, the truck cycle, costs, and regional demand changes could affect group EPS.

Key data

• 1Q26 group operating profit forecast€2.64bnBelow Visible Alpha consensus of €2.83bn, a difference of about -6.8%.
• 1Q26 group operating margin forecast3.4%Below consensus of 3.7%.
• 1Q26 automotive free cash flow forecast€479mnBasically in line with consensus of €478mn.
• ID.4 discontinuation impact€450mnExpected additional impairment or cost drag related to the ID.4 discontinuation at the Chattanooga plant in the U.S.
• 2026E group revenue€330.6bnRaised 0.8% versus the prior forecast and 2.2% above Visible Alpha consensus.
• 2026E group operating profit€15.18bnLowered 4.3% versus the prior forecast and broadly in line with consensus.
• EPS forecast revision2026E -5.4%; 2027E -1.5%; 2028E -4.6%The revision incorporates the latest estimates for Volkswagen, Porsche AG, and Traton SE.
• Target price€97.00Previous €99, based on 2027E EPS and 4.0x P/E.
• Current price and upside€92.70；4.6%Price as of the close on April 17, 2026.

Impact & implications

The report's investment implication for Volkswagen is cautious: the target price implies only low single-digit upside versus the current price, and short-term earnings may be pressured by tariffs and the ID.4 discontinuation, with the Neutral rating reflecting limited risk-reward. If the Everllence sale progresses and releases cash flow, or if European demand, China operations, and the BEV cost curve improve, market perception of the company's value could improve; but before underlying earnings improvement is consistently validated, room for valuation re-rating remains limited.

Risks

• European demand improvement may fall short of expectations or macro pressure may intensify.
• Tariff burdens may persist or the regulatory environment may fail to ease.
• Software and BEV production issues may affect new model deliveries and profitability.
• New product market acceptance may be weaker than that of recent products.
• Supply-chain constraints and rising commodity and energy prices may compress margins.
• Geopolitical risks and a slowdown in the China market may drag on volumes and profits.
• Intensifying competition and pricing pressure may lead to a slower-than-expected earnings recovery.

What to watch

• Whether actual 1Q26 operating profit comes in below the €2.83bn consensus and whether margin is close to Goldman Sachs' 3.4% forecast.
• Whether the €450mn impact related to the ID.4 discontinuation is recognized as a one-off and whether there are further additional costs afterward.
• Transaction progress, valuation, and cash flow contribution from a potential partial sale of Everllence.
• Conditions in European demand, stability of the China business, U.S. EV demand, and improvement in the BEV cost curve.
• Evidence of product, software, and cost improvements from partnerships with XPeng and Rivian.
• Whether 2026-2028 EPS and automotive free cash flow continue to be revised downward.