Volkswagen Group hits 40% EV order share early, but EV margins lag

Why EV orders jumped ahead of plan

Antlitz attributed the faster-than-planned shift to a sharp rise in fuel prices triggered by the Iran war, which has pushed drivers toward electric cars sooner than the company expected. The 40% order share compares with about 25% of registrations in Europe so far this year.

The original plan was for 40% EV sales in Europe to arrive alongside the cost-competitive SSP electric platform in 2029. That platform is still under development, but the fuel-price spike has pulled demand forward.

Margins remain the problem

The profit picture has not kept pace. Antlitz described the shift as margin-dilutive, saying: "The ramp-up of our BEV share is much faster than the ramp-down of the costs". The new small EVs perform better on margin than earlier models such as the ID 3, but not well enough. The ID Cross is at 70-80% of the margin of its combustion-engine equivalent, the T-Cross, while the cheaper ID Polo is "still weaker", according to Antlitz.

In plain terms, the cars do not yet make money, and that lands on a company already dealing with slumping sales in China. The group has a plan to cut EV production costs, including making cheaper lithium-iron-phosphate batteries in Europe, but change is slow at a manufacturer of its size. The result is a squeeze: customers are ordering cars that Volkswagen cannot yet price aggressively without losing ground to competitors.

What the quarter did and did not disclose

The 40% figure and the 150,000 orders are concrete numbers from the earnings call, and they show the group still has pulling power against competition from China and from rivals closer to home. What the call did not provide, at least in the material available, is a headline profit figure for the quarter. The sources describe the margin effect in relative terms, such as the ID Cross sitting at 70-80% of the T-Cross margin, rather than stating an absolute profit number.

That distinction matters for anyone trying to judge how serious the margin problem is. A relative comparison tells you the direction of travel, not the size of the gap in euros. Until the group publishes a specific profit figure, the safest reading is that EV demand is ahead of schedule while EV profitability is behind it.

The AI boom is pulling manufacturing capacity and investment away from the basic semiconductors that modern cars rely on, raising the prospect of a second automotive chip shortage, according to warnings from two semiconductor manufacturers and a German parts supplier. The pressure is not coming from GPU makers such as Nvidia buying up every chip, but from further upstream, where foundries and assembly plants are shifting toward AI data centre work.

Nexperia chief executive Stefan Tilger told Reuters that rivals had moved commodity semiconductor supply toward chips used in AI data centres, and that the auto industry is "suffering quite heavily" as a result. STMicroelectronics chief executive Jean-Marc Chery is reported to see the same pattern, with foundries and assembly plants increasingly "disengaging" from mainstream automotive and industrial applications.

Where the squeeze is coming from

Much of the production now being redirected once served mature chips, the kind used in cars and other industrial equipment, so a bottleneck is building in the automotive supply chain. Tilger also points to robotics as another emerging area drawing on the same capacity.

The two executives stress that the shortage is not simply a case of big GPU companies consuming all available output. The constraint sits upstream of that, in the foundries and assembly plants that decide which orders to prioritise.

Aumovio warns chip costs will explode

The impact is already visible at supplier level. Aumovio, the German maker of sensors, cameras and other in-vehicle electronics whose customers include BYD, BMW and Ford, warned on a recent earnings call that its chip costs are rising and will "explode" next year.

Interim finance head Claus Bauer attributed the situation directly to AI data centres. "We can tell you that there's no price sensitivity whatsoever in that area," he said, adding that suppliers in that segment could sell twice their capacity into what he described as a very lucrative, non-price-sensitive market.

That asymmetry is the core of the problem for car buyers. AI buyers can absorb higher prices, so chipmakers have every incentive to serve them first, which leaves automotive orders competing for the same mature-node capacity without the same willingness to pay. Rising component costs at suppliers like Aumovio feed into the price of the electronics that go into cars, though the sources do not quantify how much of that reaches showroom prices.

Echoes of the pandemic crunch

Automakers have been here before. During the pandemic, chip shortages forced car companies to idle production lines and even ship vehicles without certain computer-reliant features, such as automatic start/stop.

It is not yet clear whether the current squeeze will get that bad. If it does, the industry's race to make everything smarter could, at least temporarily, produce less-smart cars.

What has not been announced is when automotive chip supply is expected to return to normal. Neither Nexperia, STMicroelectronics nor Aumovio has given a timeline in the reported comments, so the duration of the squeeze remains an open question. Equally, no source puts a figure on how much vehicle prices might rise as a result, so the cost impact on buyers is a direction of travel rather than a number.