Volkswagen (VW) Suffers Humiliation of Expulsion from Leading European Index...Shock of 20% Plunge in Chinese Demand

▲ Volkswagen (VOW3)/AI generated image

German automaker Volkswagen (VW) was expelled from the Euro Stoxx 50, a leading European blue-chip index, following a profit warning. The crisis appears to be deepening due to large-scale write-downs by its sports car brand Porsche and a slump in the Chinese market.

According to CNBC on September 21 (local time), Volkswagen was removed from the Euro Stoxx 50 index, which represents the top 50 blue-chip companies in the Eurozone. This comes after its stock price plunged by over 75% since 2021 and its recent profit forecasts were significantly cut. The mechanical passive selling from index-tracking funds further intensified downward pressure on the stock price.

Previously, Volkswagen had significantly lowered its 2026 operating profit margin forecast from the previous 4.0-5.5% to a maximum of 1.0%. This was due to one-time costs amounting to approximately 10 billion euros (about 11.5 billion dollars). In particular, impairment losses related to Porsche, in which Volkswagen holds a 75.4% stake, exceeded 6 billion euros (about 6.9 billion dollars), acting as a major cause of the deteriorating performance.

U.S. tariffs and a sharp drop in demand for luxury cars in China delivered a direct blow. Porsche faced U.S. import tariffs and a cliff in overseas luxury car consumption in China, causing its profit margin to plummet to 1.1% last year. Chief Financial Officer (CFO) Arno Antlitz stated in an internal memo, "We cannot avoid a 20% contraction in China, the world's largest automotive market, an offensive by Asian competitors in Europe, and a rapid shift in demand towards low-margin electric vehicles," adding, "There is no more time to delay."

The high costs of painful restructuring are also cited as a long-term burden. Volkswagen is pursuing a restructuring agreement that includes factory closures and additional large-scale workforce reductions of over 50,000 people. However, it is observed that short-term profitability recovery is unclear due to the unavoidable massive one-time costs during the transition. With annual revenues reaching 322 billion euros, but a market capitalization of only around 38 billion euros (about 43.6 billion dollars), investor pessimism is said to have reached its peak.

Volkswagen, hampered by the Porsche shock and sluggish Chinese market, has been pushed out of the European blue-chip index it had held for nearly 15 years. The global automotive industry is now focused on whether extensive restructuring and a transformation towards electric vehicles can yield tangible results and pave the way for a performance rebound.

[Article Key Summary]

-Volkswagen was expelled from the Euro Stoxx 50 index after significantly lowering its 2026 operating profit margin forecast to 1%.

-A total of 10 billion euros in one-time costs were incurred, including 6 billion euros in impairment losses related to Porsche.

-The burden of high-cost restructuring, including large-scale layoffs, was compounded by U.S. tariffs and a 20% contraction in the Chinese market.

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