Volkswagen's restructuring negotiations remain in focus, while pressure on Audi's profitability prompts target price cut to €88

Overview

The report focuses on Volkswagen's second round of restructuring negotiations, profitability pressures at Audi and Brand Group Progressive, and revisions to the Group's earnings forecasts following 2Q26. Goldman Sachs believes the restructuring may still advance, but governance complexity, execution delays, and weakness in the Chinese business mean that sustained earnings improvement has yet to be demonstrated, and it therefore maintains its Neutral rating.

Core views

First, the restructuring negotiations remain Volkswagen's most important near-term event. The large-scale restructuring plan proposed by the company in July failed to pass the initial Supervisory Board vote. Media reports indicate that if renewed negotiations with the Supervisory Board in September still make no progress, the company may convene an extraordinary general meeting. Of the Supervisory Board's 19 seats, 12 are held by employee representatives and representatives associated with the state government, creating significant coordination challenges for routine decision-making. Meanwhile, Porsche SE holds 53.5% of the voting rights and Qatar Holding holds 17.0%, giving them a combined stake of more than 70%. An extraordinary general meeting could therefore accelerate shareholder-level decisions. However, Goldman Sachs emphasizes that an extraordinary general meeting is the highest level of escalation and presents its own execution challenges; even if the restructuring is approved, the gap between the decision and actual implementation would still pose a timing risk. Second, Goldman Sachs lowers its earnings forecasts for Brand Group Progressive to reflect residual value pressure, weakness in the China CKD business, and deteriorating overall market expectations. Its FY26 and FY27 operating profit forecasts for the division were cut by 11% and 8%, respectively, and FY26 return on sales is expected to be at the lower end of the company's 5%-7% guidance range. Goldman Sachs expects residual value declines to generate approximately €400mn of additional special costs in 2H26, following an impact of approximately -€400mn already incurred in 1H26. This means the related pressure was not fully absorbed in the first half, and Audi's earnings will remain burdened in the second half. The Chinese business is another key reason for the reduction in Audi forecasts. Registrations at Audi's Chinese joint venture operations declined by 28% over the past three months and 19% over the past six months. Based on this, Goldman Sachs expects that the China CKD business, which previously made a significant contribution to return on sales, will not stabilize in 2H26 because there are currently no signs of improvement in the Chinese market. Although the outlook for the Audi brand in Europe is improving, Goldman Sachs believes that the recovery in 2H26 return on sales implied by consensus expectations will be difficult to achieve under current market conditions. Its view is therefore notably below market expectations for an earnings recovery in the second half. At the Group level, Goldman Sachs believes Volkswagen is improving its competitive position through restructuring and strategic partnerships, but its multilayered governance structure and organizational complexity raise doubts about whether the company can respond promptly to persistent operating pressures. Based on its latest view of the Chinese market and updated forecasts for Porsche AG and Traton SE, Goldman Sachs revised its FY26E, FY27E, and FY28E reported EPS forecasts for Volkswagen by -16%, -4%, and +1%, respectively; these forecasts do not incorporate the Everllence transaction. The largest cut is to FY26, reflecting near-term special costs and pressure from the Chinese business. The modest increase for FY28 does not alter its cautious view of the company's execution capabilities over the short to medium term. Goldman Sachs believes investors will need to see evidence of sustained underlying earnings improvement before assigning the company a valuation re-rating. On valuation, Goldman Sachs retains the P/E methodology used for European mass-market automotive peers, applying an unchanged target multiple of 4.0x to blended FY27E/FY28E EPS. This results in a 12-month target price of €88, down from €89 previously, while maintaining the Neutral rating. Upside could come from stronger European demand, European macroeconomic concerns failing to materialize, faster battery electric vehicle adoption and an improved cost curve, corporate restructuring, a relaxation of tariffs or regulation, stabilization in China, and investors adopting a SOTP methodology and recognizing the value of Volkswagen's stake in Porsche AG. Downside factors include software and battery electric vehicle production issues, weaker acceptance of new products than for recently launched models, supply-chain constraints, commodity and energy prices, geopolitics, an economic slowdown in China, pricing pressure, and intensifying competition.

Analysis framework

Goldman Sachs first assesses the impact of the September restructuring negotiations, the Supervisory Board's governance structure, and a potential extraordinary general meeting on decision-making and execution progress. It then revises segment earnings based on residual value losses, Audi China registrations, and European market trends; aggregates factors related to China, Porsche AG, and Traton SE to adjust Group EPS forecasts; and finally applies a 4.0x P/E multiple to blended FY27E/FY28E EPS, using European mass-market automotive peers as a reference, to determine the 12-month target price.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  P/E valuation based on blended FY27E/FY28E EPS

  Goldman Sachs applies an unchanged target P/E multiple of 4.0x to blended FY27E and FY28E earnings per share. This multiple is consistent with the valuation methodology used for European mass-market automotive peers and yields a 12-month target price of €88.

• Event Strategy and Behavioral FinanceEvent-driven analysis

  Scenario analysis of restructuring negotiations and an extraordinary general meeting

  The report views the renewed negotiations in September and a potential extraordinary general meeting as events that could accelerate stakeholder decision-making. At the same time, it distinguishes faster decision-making from actual execution and emphasizes the escalation costs and implementation delays associated with an extraordinary general meeting.

• Event Strategy and Behavioral FinanceExpectation Gap/Expectation Management

  Comparison between Goldman Sachs forecasts and market consensus expectations

  The report compares its own assessment with market expectations for an improvement in Audi's 2H26 return on sales, concluding that the second-half margin recovery assumed by consensus will be difficult to achieve given residual value costs and weakness in the Chinese business.

Asset mapping & comparison

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

• Volkswagen (VOWG-P.DE)

  The company directly covered by the report; restructuring progress and the performance of Audi and the Chinese business jointly affect Group earnings forecasts and valuation.

  Strengths

  The outlook for its European brands is improving; Porsche SE and Qatar Holding together hold more than 70% of the voting rights, which could accelerate shareholder-level restructuring decisions; the company is improving its competitive position through restructuring and strategic partnerships.

  Weaknesses

  Its governance hierarchy and organizational structure are complex, and there may be delays between approval and implementation of the restructuring; Audi faces residual value costs and weakness in the China CKD business.

  Comparison

  The 4.0x target P/E multiple is consistent with Goldman Sachs' methodology for European mass-market automotive peers; Goldman Sachs believes market expectations for an improvement in Audi's 2H26 return on sales are too high.

  Risks

  Software and battery electric vehicle production, new-product acceptance, supply chains, commodity and energy costs, geopolitics, a slowdown in China, and price competition could all create downside risks.

Key data

• Key Supervisory Board seats12/19 seatsEmployee representatives and representatives associated with the state government hold 12 of the 19 Supervisory Board seats
• Porsche SE voting rights53.5%Together with Qatar Holding, it holds more than 70% of the voting rights
• Qatar Holding voting rights17.0%Together with Porsche SE, it holds more than 70% of the voting rights
• Brand Group Progressive operating profit forecast revisionsFY26 -11%; FY27 -8%Reflecting pressure from residual values, the China CKD business, and market expectations
• FY26 expected return on salesLower end of the company's 5%-7% guidance rangeGoldman Sachs' forecast for Brand Group Progressive
• 2H26 special costs related to residual valuesApproximately €400mnAn impact of approximately -€400mn was already incurred in 1H26
• Audi China joint venture business registrationsPast 3 months -28%; past 6 months -19%Based on this, Goldman Sachs expects the China CKD business not to stabilize in 2H26
• Reported EPS forecast revisionsFY26E -16%; FY27E -4%; FY28E +1%Incorporates the latest view on China and forecasts for Porsche AG and Traton SE, but excludes the Everllence transaction
• Target valuation multiple4.0xApplied to blended FY27E/FY28E EPS, with the multiple unchanged
• 12-month target price€88Previously €89

Impact & implications

The report believes an extraordinary general meeting could break through part of the governance deadlock but cannot guarantee timely implementation of the restructuring. Audi's residual value losses and weakness in the China CKD business make the 2H26 margin improvement expected by the market difficult to achieve and significantly reduce the FY26 earnings forecast. Until sustained improvement in underlying earnings is demonstrated, Goldman Sachs expects Volkswagen to struggle to achieve a valuation re-rating and therefore only slightly lowers its target price while maintaining the Neutral rating.

Risks

• Even if the restructuring plan is approved, there could still be a significant delay between the decision and actual implementation.
• Software development or battery electric vehicle production issues could affect operating performance.
• Market acceptance of new products may be weaker than for recently launched models.
• Supply-chain constraints could disrupt production and deliveries.
• Rising commodity and energy prices could intensify cost pressures.
• Geopolitical developments could affect business operations.
• An economic slowdown in China could further weigh on Audi and Group performance.
• Pricing pressure and intensifying competition could compress profitability.

What to watch

• Monitor whether the second round of restructuring negotiations with the Supervisory Board in September makes progress.
• Monitor whether the company convenes an extraordinary general meeting and whether decisions can be translated into actual restructuring measures.
• Monitor the actual impact of approximately €400mn in special costs related to residual values in 2H26.
• Monitor whether Audi China registrations and the CKD business show signs of stabilization.
• Monitor whether European demand, battery electric vehicle adoption, and the cost curve improve.
• Monitor whether underlying earnings can improve sustainably and provide evidence supporting a valuation re-rating.
• Monitor whether investors begin using a SOTP methodology to recognize the value of the Porsche AG stake.