Skoda overtakes Porsche as VW Group’s top profit engine

Volkswagen disclosed a roughly €6 billion goodwill impairment on its 75 percent stake in Porsche last Friday, September 18, as part of a broader profit warning that sent shares tumbling and underscored how far the once-prized sports car brand has fallen within Europe's largest automaker.reuters+1

The non-cash charge was triggered by weakened financial expectations for Porsche, whose operating return on sales collapsed to 1.1 percent in 2025, down from 14.1 percent the year before. Volkswagen now expects a group operating margin of up to just 1 percent for 2026, slashed from a prior forecast of 4 to 5.5 percent. The write-down is part of approximately €10 billion in one-off costs the group flagged, which also include restructuring charges as VW pushes ahead with what it calls the largest overhaul in its 89-year history.wsj+3

China Collapse and EV Missteps

At the heart of Porsche's decline is its deteriorating position in China, long its single most important market. Sales there peaked in 2021 and have fallen every year since, dropping 32 percent in the first half of 2026 to just 14,501 vehicles. Conditions in North America, the Middle East, Africa and India have offered little relief. Tariff pressures from the United States and the costly pivot toward electrification have compounded the problem, squeezing both volume and margins.sedaily+1

Porsche CEO Michael Leiters has maintained a medium-term margin target of 10 to 15 percent and projected a recovery to between 5.5 and 7.5 percent operating return on sales for the current year, according to an internal memo viewed by Reuters. But analyst Ferdinand Dudenhoeffer told Reuters that "the days of Porsche being a profit driver are over," warning that the brand's "value over volume" strategy is making it "smaller and smaller".jalopnik+1

Skoda: The New Porsche?

In a reversal that would have seemed unthinkable a few years ago, Skoda — VW's budget-oriented Czech brand — posted an 8.3 percent operating return on sales in the first half of 2026, comfortably ahead of Porsche's 7.8 percent over the same period. In 2025, the gap was even starker: Skoda's 8.3 percent against Porsche's 1.1 percent. Automotive analyst Matthias Schmidt told Reuters that "the Czech brand has effectively become the new Porsche of the Group".sedaily+1

The comparison carries weight because both brands report operating return on sales the same way — operating profit divided by revenue — making it a direct, apples-to-apples measure. Skoda's result was no one-off: it came alongside record revenue, record operating profit and more than one million deliveries, buoyed by strong sellers like the Octavia and a growing lineup of affordable electric vehicles.motor1

What It Means for VW

The write-down shrinks Porsche's goodwill to about €10 billion, down from the €18.8 billion recorded when the brand went public in one of Europe's largest IPOs in 2022. For Volkswagen, which needs Porsche to generate cash to fund its restructuring — including 50,000 job cuts agreed weeks ago — the erosion poses a direct challenge. As Dudenhoeffer put it, the question is no longer whether Porsche can lead VW's earnings but whether it can avoid dragging them down further.jalopnik+2