Citi analysts said Volkswagen’s stock is likely to trade within a narrow range over the coming year unless the European Union takes decisive action on trade measures aimed at curbing Chinese competition. The bank maintained its Buy rating on the German automaker and kept its €100 price target unchanged.
Following Volkswagen’s third-quarter profit warning issued on a Friday afternoon, Citi updated its model to reflect an additional €1 billion deterioration in 2026 operating performance across VW Core and Audi. The deterioration stems from pressure in China, intensifying Chinese competition in Europe, and margin dilution from battery-electric vehicle sales.
The firm added approximately €8.5 billion in incremental exceptional costs for the third quarter of 2026, alongside an assumed timeline for Volkswagen’s announced €10 billion restructuring program. Citi’s downward revision to 2026 estimates was smaller than the guidance cut issued by the company because the bank had already positioned itself near the low end of prior forecasts. Underlying earnings before interest and taxes, excluding exceptional items, are expected to remain near 4% in 2026, matching Citi’s outlook.
Restructuring charges are projected to total €2 billion in the fourth quarter of 2026 as decisions are finalized, followed by €6 billion in fiscal 2027. The firm cautioned that timing around actual decision-making and charge recognition remains difficult to forecast.
Citi cut its 2026 earnings-per-share estimate to a loss of €3.36, down from a previous forecast of €15.15. Looking ahead, it expects EPS of €8.55 in 2027 and €20.15 in 2028, compared with earlier projections of €19.61 and €23.92, respectively.
On cash flow, Citi anticipates Volkswagen’s free cash flow will climb to more than €6 billion, supported by steady underlying earnings and reductions in capital expenditure and research and development spending. However, the firm sharply lowered dividend assumptions due to the new charges and unclear management plans for payouts, noting that the resulting volatility is a direct consequence of the company’s payout-ratio-based dividend policy. Citi suggested Volkswagen consider adopting a more consistent, albeit lower, dividend approach similar to peer Renault.
The analyst noted that the current share price appears to reflect a worst-case scenario across all five business segments, with no credit given for potential asset disposals or restructuring savings. Key risks identified include Volkswagen’s history of negative Friday-afternoon announcements, ongoing earnings volatility, and exposure to adverse EU trade competition trends.
