Volkswagen is openly admitting what the auto industry has been discussing for years: battery electric cars still do not generate the same level of profit as combustion-powered models.

European automakers are investing billions into electrification, but the market reality is proving more difficult than many expected only a few years ago.

For Volkswagen, the transition is no longer only about technology or emissions targets. It is also about whether electric vehicles can become financially sustainable at scale.

That question is becoming more urgent as the company faces pressure from regulators, weaker demand in key markets, and the high cost of developing new platforms.

According to information reported by Automotive News, Volkswagen’s battery electric models currently deliver between 70 and 80% of the profit margin generated by comparable gasoline or diesel vehicles.

In practical terms, that means a vehicle based on the current MEB platform brings in significantly less profit than a conventional car of a similar class.

The main reasons are high battery production costs, complex electronics, and expensive raw materials that continue to put pressure on the entire industry.

The situation is made even more complicated by strict European Union CO₂ rules. Volkswagen estimates that emissions penalties from 2025 to 2027 could reach between about $430 million and $540 million per year.

Arno Antlitz, Volkswagen Group’s chief financial officer, said the company has to carefully balance higher electric vehicle sales volume with the need to avoid large regulatory penalties.

That creates a difficult equation. Volkswagen needs to sell more EVs to meet emissions targets, but those same vehicles still produce weaker margins than the combustion models they are meant to replace.

Volkswagen is placing major hopes on its new SSP architecture. This platform is designed to unify existing technologies such as MEB, MEB Plus, and the PPE architecture used by Porsche for models such as the Macan.

SSP was originally planned for 2026, but development has slowed, and its arrival is now expected closer to the end of the decade.

That platform is supposed to bring a major reduction in production costs and finally move battery electric vehicles closer to the profitability of conventional cars.

Rivian will also play an important role in Volkswagen’s next software generation. The German group plans to integrate Rivian’s electronic architecture to give future models more advanced digital functions, faster software development, and a more modern user interface.

While Europe is showing some signs of recovery in battery electric sales, the situation in the United States and China is much tougher.

Volkswagen’s EV sales volume in the U.S. fell by 80% in the first quarter of 2026 compared with the same period last year. In China, the decline reached 64%.

At the moment, Volkswagen sells only the ID.4 and ID. Buzz in America. The ID. Buzz is skipping the 2026 model year as the company prepares a new version arriving as a 2027 model.

Volkswagen is also trying to improve profitability in Europe through more affordable battery electric cars. One of the most important will be the future ID. The Polo is expected to start at about $27,000.

Models like the ID. Polos are not planned for the U.S. market, where buyers still prefer larger SUVs and pickup trucks. That makes Volkswagen’s global strategy even more complicated.

The business of developing and producing battery electric cars is now going through a period of heavy pressure. Automakers must invest huge sums in new technology, meet stricter emissions rules, and keep prices competitive at the same time.

Volkswagen is only one example of how much more complex and expensive the move toward a fully electric future has become.

This article originally appeared on Autorepublika.com and has been republished with permission by Guessing Headlights. AI-assisted translation was used, followed by human editing and review.

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