German automotive giant Volkswagen Group on Thursday, October 30, 2025, announced a third-quarter after-tax loss of €1.07 billion (approximately KSh 160.7 billion), a stark reversal from the €1.56 billion profit recorded in the same period last year. The loss, its first since the second quarter of 2020, is attributed to a combination of costly U.S. import tariffs, significant write-downs related to a strategic overhaul at its subsidiary Porsche, and intense market pressure in China.

The Wolfsburg-based company confirmed the negative result was driven by €7.5 billion in extraordinary expenses within the first nine months of the year. Chief Financial Officer Arno Antlitz stated that higher tariffs alone are expected to cost the group up to €5 billion annually. "The result is much weaker compared to the same period last year," Antlitz said in a statement, adding that excluding the special charges, the group's operating margin would have been a "respectable" 5.4 percent.

Implications for the Kenyan Market

Volkswagen's global financial struggles cast a shadow over its renewed focus on the Kenyan market. In August and September 2025, Kenya Vehicle Manufacturers (KVM) in Thika, partly owned by Volkswagen's local partner CFAO Mobility Kenya, resumed the assembly of several VW models, including the Touareg, Tiguan, T-Cross, and Polo Vivo. This move was hailed as a significant boost for local industry, promising job creation, skills transfer, and more affordable vehicles by reducing import duties.

The global losses, however, could introduce market instability. Potential risks for Kenyan consumers include price adjustments on fully imported models to offset losses elsewhere. Furthermore, sustained financial pressure on the parent company could influence future investment levels in the Thika plant and the pace of introducing new locally assembled models. Volkswagen Group Africa has previously stated its intention to make Kenya its hub for the East African region, a strategy that may be tested by these global headwinds.

A Three-Pronged Global Crisis

The massive loss stems from three core challenges. First, persistent U.S. tariffs on European auto imports, a legacy of former President Donald Trump's trade policies, continue to inflict heavy costs. CFO Antlitz confirmed the company expects these tariffs to remain, with a direct financial impact of at least €4 billion in 2025.

Second, luxury brand Porsche is navigating a turbulent and expensive strategic shift. The subsidiary posted a Q3 operating loss of nearly €1 billion after scaling back its ambitious electric vehicle (EV) plans due to cooling demand and development delays. This reversal forced Porsche and the wider VW Group to absorb write-downs of €4.7 billion. The company has postponed some all-electric models, reintroducing combustion engine and hybrid options to its future lineup.

Third, Volkswagen is facing a steep decline in its once-dominant position in China. Deliveries in the world's largest auto market fell 7.2% in the third quarter as the company struggles to compete with domestic EV manufacturers like BYD and a more aggressive Tesla. This competition has eroded market share and profitability in a region crucial to VW's bottom line.

An Industry Under Pressure

Volkswagen is not alone in its struggles. The entire German auto industry is grappling with the high costs of the EV transition, geopolitical trade friction, and a pessimistic economic outlook, according to Germany's VDA (Association of the Automotive Industry). Other German carmakers like BMW and Mercedes-Benz have also reported significant profit declines in 2025 due to tariffs and Chinese market conditions, though their larger U.S. manufacturing presence has provided some insulation. Despite the significant loss, Volkswagen's revenue for the quarter rose slightly by 2.3% to €80.3 billion, and the company maintained its full-year forecast, projecting an operating margin between 2.0 and 3.0 percent. This suggests confidence in its ongoing cost-cutting programs to navigate the persistent challenges ahead.