Volkswagen Rides Regulatory Tailwind as Product Offensive Collides With Contract Deadline

VW stock gains 2% as Berlin and Paris reportedly plan to loosen EU combustion-engine rules; Porsche sets 10-15% medium-term margin target.

Volkswagen shares climbed 2.0% on Wednesday to EUR 70.02, lifted by press reports that Berlin and Paris are preparing to soften the European Union's combustion-engine rules — a prospect that buoyed the entire automotive sector.

According to Handelsblatt, Chancellor Friedrich Merz and French President Emmanuel Macron have agreed on a joint approach, citing three insiders. The two governments intend to loosen the EU-wide ban on internal combustion engines more extensively than previously planned, with a proposal to be tabled before next week's EU summit. The hint of a more flexible regulatory framework brought relief across the industry.

The stock's advance also drew support from within the group. At its Capital Markets Day, Porsche AG — Volkswagen's sports-car subsidiary — unveiled a strategy dubbed "Sportwagenschmiede '35," targeting an operating return on sales of between 10% and 15% in the medium term and 15% over the longer haul. The brand also aims to push its break-even threshold below 200,000 vehicles.

Battery Deals and a Slimmed-Down Stake

On the group level, Wolfsburg is simultaneously reordering its supply chain. At the end of September, Volkswagen, PowerCo and Gotion High-tech agreed on three joint ventures covering battery cells and cathode material, with sites in Valencia, Šurany and Kenitra. Volkswagen also sold a 5.3% stake in Gotion through a subsidiary. In early October, the group's "For Europe" initiative put its own emphasis on electric mobility, batteries, software and artificial intelligence.

Product news is stacking up as well. On Friday, October 9, the manufacturer plans the world premiere of the ID. Tiguan. The fully electric model is scheduled to hit the market in early 2027, replacing the existing ID.4 and ID.5 and selling alongside variants with combustion and hybrid powertrains. The next international appearance follows immediately: on October 12, the Paris Motor Show opens its brand presentations, where Volkswagen, Volkswagen Commercial Vehicles, Škoda, CUPRA and Audi intend to showcase their respective new models. A exchange with media, association and political representatives is already set for October 11.

Autonomous Shuttle, Deep Restructuring

Those premieres land in the middle of far-reaching restructuring. Volkswagen cut its guidance and announced special charges just over three weeks ago, since when the shares have shed 15.2%. At the time, the board lowered its 2026 operating return on sales target to a maximum of 1%, pointing to burdens of roughly EUR 10 billion and a tougher market environment in China.

Technological partnerships are moving ahead in parallel. In mobility services, group subsidiary MOIA America, together with Beep, launched passenger operations using autonomous ID. Buzz vehicles in Lake Nona near Orlando. Registered riders can use three designated routes via an app, accompanied by safety staff on board.

Union Standoff and a Cautious Analyst

On the cost side, intense weeks lie ahead. Volkswagen gave timely notice on various collective agreements effective December 31. The existing future collective agreement, including job security, is explicitly not affected. Management and IG Metall have scheduled further negotiation rounds for the second half of October. Yesterday, the union announced information campaigns at the plants to brief the workforce on the terminated contracts.

Sentiment on the capital markets remains challenging. According to media reports, Deutsche Bank Research analyst Tim Rokossa lowered his price target for the stock from EUR 115 to EUR 105 on September 29, while keeping his "Buy" rating and calling the China business the industry's biggest structural challenge. The shares closed yesterday at EUR 68.64, leaving the stock just 2.4% above its 52-week low.

Clarity on the current financial position should arrive soon: on October 13, the board holds a conference call ahead of the quarter's end, before the interim report for the first nine months is published on October 29.