Volkswagen (VOW.DE) Group reported mixed results and a downbeat forecast, reflecting some of the deeper challenges facing large multinational automakers as they come grips with cost-cutting, and an evolving marketplace where EV uptake has been choppy.

Volkswagen — which counts brands like its Audi, Porsche, Bentley and others in its portfolio — reported second quarter revenue of €83.339 billion ($90.0 billion) vs. €81.697 estimated, a rise of 4.1% compared to a year ago. Operating profit came in at €5.464 billion ($5.90 billion) vs. €5.486 billion, a slight miss compared to estimates but a drop of 2.4% compared to the same period a year ago.

Operating returns, or operating margins, fell to 6.6% in the quarter from 7% a year ago, though higher than the overall first half margin of 6.3%. Volkswagen said its operating results were impacted by unplanned items like severance payments at VW, with margins hit by higher fixed costs, the closing of a gas turbine business, and the winding down of VW Bank in Russia.

Volkswagen shares trading in Germany were down around 1% in late trading.

“A margin of 6.3% after six months is below our ambitions and potential, given our array of great vehicles, our brand portfolio, and our global footprint,” Volkswagen Group CFO & COO Arno Antlitz said in a statement. “However, we must make significant efforts on the cost side in the second half and beyond in order to achieve our targets.”

Across its sales territories, VW saw overall growth in North America and South America, which nearly offset losses it said in regions like China, the company said. Q2 global vehicle deliveries fell 3.8% to 2.244 million, with a rise in revenue due to financing activities, and reflecting better product mix.

Added CEO Oliver Blume: “In a demanding environment, 2024 marks the Group’s largest product offensive and a comprehensive restructuring of our business areas … However, much of the work still lies ahead of us.”

The German automaker has also recently taken advantage of partnerships to lower costs and time to market for its EVs, primarily focused on China. VW said it would partner with China’s XPeng to produce two new EVs with Volkswagen branding, powered by XPeng’s software and EV engineering.

Volkswagen's premium brand Audi also announced it had signed a deal with China's state-owned SAIC to develop new EVs for the mainland.

In the US, Volkswagen announced it will work with Rivian to create next-gen software-defined vehicles (SDV) to be used in both companies’ future EVs. Rivian will license its existing IP rights to a joint venture, with Volkswagen infusing up to $5 billion through 2026.

Most recently, Volkswagen backtracked and said its ID.7 EV sedan would not come to the US, reflecting diminished demand for EVs in the US, in particular vehicles not conforming to a crossover or SUV body style.

In terms of its outlook, Volkswagen reiterated 2024 sales revenue will top 2023’s total by 5%. Operating return on sales will be between 6.5% and 7%, which the company cut from 7% to 7.5% in July.

VW’s automotive cash flow forecast was cut back in July as well to €2.5 billion ($2.7 billion) to €4.5 billion ($4.86 billion), citing investments and mergers and acquisitions activity, in particular its investment in Rivian that is expected in the back half of the year. VW’s prior cash flow forecast was as high as €6.5 billion ($7.02 billion).

Volkswagen’s US rivals like Ford and GM also saw there shares hit following Q2 results, with concerns being peak profits have already been hit, and likely pressure on prices as inventories rise and consumers bear the brunt of higher financing costs and overall inflation.

Toyota, which had powered through with high sales of its hybrids and measured approach to EV product rollouts, saw its shares on Thursday take a steep hit on concerns growth was slowing across its territories, in particular China, and weaker inventories hurting sales in the US.

Pras Subramanian is a reporter for Yahoo Finance covering the auto industry. You can follow him on X and on Instagram.

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