Volkswagen target price remains at EUR 100, but the gap between “ambition and execution” remains the core contradiction

Overview

This report evaluates Volkswagen AG's 2Q26 results, FY26 guidance, 2030 target picture, restructuring plan, China NEV product performance, and valuation. Bernstein views Volkswagen's decision to maintain FY26 operating margin guidance of 4.0%-5.5% as somewhat positive against a weak industry backdrop, but believes the company must deliver a clear margin improvement in 2H26 and provide firmer evidence that cost reduction, capacity contraction, and product competitiveness in China can be executed.

Core views

The core view is that Volkswagen's strategic ambition is high, but so are the execution challenges. The company is too large, too complex, and too costly, while European demand and competition in China mean the old scale and cost structure no longer fit. Management wants to cut capacity, reduce investment, trim models and configurations, lower administrative expenses, and improve efficiency through a regionalized technology ecosystem; however, German unions, political influence from Lower Saxony, disagreements on the supervisory board, and the intensity of competition in China's NEV market create significant uncertainty around execution and timing.

Analysis framework

The report assesses the conditions for a stock re-rating by combining 2Q26/1H26 financial data, changes in FY26 guidance, 2030 targets, restructuring details disclosed by German media, scenario analysis by plant cost and capacity utilization, tracking of registrations for new models in China, Bernstein versus market consensus comparisons, and SOTP valuation.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation and revaluation of equity stakes

  The report uses Volkswagen's core business, its Porsche stake, and its TRATON stake, among others, to form the valuation framework; the cut to 2026 earnings forecasts is partly offset by the increase in the market value of the Porsche and TRATON holdings, so the target price remains at EUR 100.

• Operating analysisMargin bridge and guidance test

  Required margin improvement in 2H26

  The report compares the reported 1H26 operating margin of 3.8% with FY26 guidance of 4.0%-5.5%, pointing out that a clear sequential improvement in the second half is required even to reach the low end.

• Strategic executionTarget Picture 2030

  Resetting costs, capacity, complexity, and investment intensity

  Volkswagen's 2030 targets include an 8%-10% operating margin, automotive cash conversion above 60%, and an investment ratio of about 9%, while also planning to reduce models, configurations, platforms, and administrative expenses and align capacity to a demand base of about 9 million units.

• Market validationTracking registrations of new models in China

  Early sales validation for new products

  The report tracks registration volumes in China for models such as the Audi E5 Sportback, Audi E7X, VW ID.ERA9X, and the ID.Unyx series, arguing that accelerating sales of new models in 2H26 are critical to proving the China strategy is working.

Asset mapping & comparison

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

• VOW3.GR

  core covered asset

  Strengths

  The EUR 100 target price implies substantial upside versus the current price of EUR 71.16; group liquidity is strong, and the value of the Porsche and TRATON stakes has increased; Europe BEV order momentum is solid.

  Weaknesses

  1H26 margin was only 3.8%, revenue guidance was lowered, and the organization is complex, costly, and burdened by excess capacity, while restructuring execution faces political and labor resistance.

  Comparison

  Relative to domestic Chinese automakers, Volkswagen remains at a disadvantage in product speed, price competitiveness, and sustained popularity in China's BEV and NEV market.

  Risks

  If 2H26 margins do not improve, sales of new China models do not accelerate, or German restructuring is blocked, the stock re-rating may continue to be delayed.

• Porsche AG

  an important component of Volkswagen's stake value

  Strengths

  The report says the value of Volkswagen's Porsche stake rose from €27.9bn to €30.3bn, partly offsetting the cut to 2026 earnings forecasts.

  Weaknesses

  Porsche's own operations remain affected by the model cycle, Macan BEV sales, and capacity allocation.

  Comparison

  The increase in Porsche stake value supports the SOTP valuation.

  Risks

  If Porsche earnings or valuation decline, support for Volkswagen's SOTP will weaken.

• TRATON

  part of Volkswagen's stake value and commercial vehicle value

  Strengths

  The value of Volkswagen's TRATON stake rose from €13.7bn to €17.5bn, and Bernstein also raised forecasts after TRATON increased guidance.

  Weaknesses

  Volkswagen commercial vehicles were dragged by restructuring and tariff costs in 2Q/1H.

  Comparison

  The increase in TRATON value helps stabilize Volkswagen's target price.

  Risks

  The commercial vehicle cycle, tariffs, and restructuring costs may affect contribution.

• Audi

  a key Volkswagen Group brand and vehicle for its China NEV strategy

  Strengths

  The AUDI E5 Sportback in China won multiple awards, and localized models such as the E7X reflect the in-China-for-China strategy.

  Weaknesses

  Audi's 2Q26 margin was only 3.6%, the E5's early sales momentum did not persist, and the sales peak driven by price incentives is unsustainable.

  Comparison

  In the China market, it faces extremely intense competition from domestic rivals such as Zeekr, Xiaomi, Li Auto, and Aito.

  Risks

  If registrations of the E7X, E5, and other localized models do not improve in 2H26, confidence in Audi and Volkswagen's China strategy will be damaged.

Key data

• RatingMarket-PerformBernstein maintains a neutral rating, believing upside exists but catalysts are limited.
• Target price100.00 EURThe target price remains unchanged.
• Current price71.16 EURThe table disclosure date is 2026-07-24.
• FY26 operating margin guidance4.0%-5.5%The company maintained margin guidance, but revenue guidance was lowered.
• FY26 revenue guidancelowered from 0%-3% growth to -3%-0%The weaker revenue outlook is the main reason Bernstein cut its 2026 forecast.
• 1H26 revenue€158bnGroup 1H26 sales revenue was broadly stable.
• 1H26 operating profit€5.9bn; reported margin 3.8%Excluding about €0.9bn of special items, it would be about €6.9bn and a 4.3% margin.
• 2Q26 operating margin4.2%The company said it would be about 4.3% excluding about €0.1bn of special items.
• 1H26 automotive net cash flow€3.2bnUp €4.5bn year over year.
• Automotive net liquidity€32.7bnLiquidity remained strong despite dividend and hybrid capital interest payments.
• Global deliveriesdown 6% in 1H26 to 4.1m unitsExcluding the China joint ventures, 1H growth was 2% and 2Q growth was 3%.
• China deliveriesdown 26% in 1H26; down 37% in 2Q26China is one of the most important sources of market pressure in the report.
• Europe BEV ordersup 57% year over year to 330k unitsBEVs accounted for 31% of the European order book, up from 22% at the end of 2025.
• Germany headcount reduction targetreduce 50k employees in Germany by 2030About 35k of these involve VW AG, Audi, Porsche, and CARIAD.
• Administrative expense targetcut global administrative expenses by 25% or about €11bnThe automotive administrative expense ratio target is to fall from 15.7% in 2025 to 12% in 2030.
• Capacity targetfurther reduce from about 10m units to about 9m unitsPre-pandemic capacity was about 12m units, already reduced by about 2m units.
• China 2030 target10%-12% share; €1.6bn-€2.0bn proportionate operating profitThe 2026 target is €0.2bn-€0.6bn.
• Everllence transactionsell 51% to Bain Capital, with expected proceeds of about €7.4bnHelps focus on the core automotive business and provides restructuring funding.
• 2026E revenue forecast€319.878bnBernstein's 2026E revenue forecast in the simplified P&L.
• 2026E operating margin forecast4.3%Above 2025's 2.8%, but still well below the 2030 target.

Impact & implications

The investment implication is that Volkswagen stock appears cheap on valuation, with meaningful upside to the target price versus the current price, but the market needs more credible evidence of execution before a sustained re-rating is possible. The short-term keys are whether 2H26 margins can rise, whether Audi's improvement can materialize, whether cost cutting gains support from governance bodies and labor stakeholders, and whether new models in China can ramp quickly in the highly competitive NEV market. If this evidence is insufficient, the valuation discount may persist.

Risks

• Insufficient margin improvement in FY26 second half, making even the low end of the 4.0%-5.5% guidance difficult to achieve.
• Resistance from German unions, Lower Saxony, and the supervisory board may slow or weaken headcount reduction, capacity compression, and factory reallocation.
• China's NEV market is in an intense price war, and the popularity window for new models is very short, making it difficult for Volkswagen to regain relevance.
• The group's complexity across models, platforms, configurations, and brand portfolio is too high, so the pace of cost reduction may fall short of management targets.
• Tariffs, regulation, and weak macro demand may continue to pressure automotive profits in Europe, North America, and globally.
• If investment cuts are executed poorly, they may impair future product and software competitiveness.
• Fluctuations in the value of holdings such as Porsche and TRATON will affect support for the SOTP valuation.

What to watch

• Whether the group operating margin in 2H26 improves meaningfully from 1H26's 3.8%.
• Recovery in Audi's new models and margins, especially further management commentary on Audi after 2Q26.
• Monthly registrations in China for the Audi E7X, AUDI E5 Sportback, VW ID.ERA9X, and the ID.Unyx series.
• The progress of the German restructuring plan at the supervisory board, union, and Lower Saxony levels.
• The actual path of resetting capacity from about 10 million vehicles toward about 9 million, including model allocation at high-cost German plants.
• Progress toward reducing the administrative expense ratio from about 15.7% to the 2030 target of 12%.
• Whether the five-year investment plan is reduced from about €160bn to about €135bn, and whether the cuts affect product competitiveness.
• Completion of the sale of 51% of Everllence to Bain Capital and the use of proceeds.