VW's Preferred Shares Find a Foothold, But the Real Test Is Whether Divestments Outpace the Demand Slide

VW sells assets like MHP and Everllence to fund restructuring, but China's 26% delivery drop and margin pressure test the plan.

The arithmetic at Volkswagen is becoming brutally simple: sell off enough peripheral assets to fund a core overhaul before the core's own deterioration eats the proceeds. This week offered fresh evidence that the first half of that equation is moving — the second half remains very much in doubt.

A Portfolio Shrinking on Multiple Fronts

The most concrete step came on Monday, when Porsche signed a binding agreement to offload its IT and management consultancy MHP to Tata Consultancy Services. The Ludwigsburg-based unit employs roughly 4,500 people and generated around €743 million in revenue in 2025. That deal follows hard on the heels of mid-August's EU approval for the sale of a 51% stake in the heavy-engine subsidiary Everllence — formerly MAN Energy Solutions — to Bain Capital for €7.4 billion, a transaction expected to close by the end of 2026.

Two further disposals are reportedly in the pipeline. Volkswagen is said to be preparing a sale of its development arm IAV to Accenture, with a deal targeted before year-end; that transaction would be accompanied by a future-oriented collective agreement that could eliminate more than 2,000 of the roughly 5,000 German jobs at the company. Separately, the group is weighing a reduction of its Traton holding from 87.5% to 75% plus one share — a stake currently worth around €16.6 billion — though timing and scale remain unspecified. The common thread: raising capital without surrendering control of the truck maker.

The Numbers Behind the Urgency

The pressure to monetize assets is not hard to trace. First-half operating profit came in at €5.9 billion, down 11.6% year-on-year (the secondary source puts the decline at 12%, a rounding difference), on revenue of €158.1 billion. The operating margin stood at 3.8%. China deliveries collapsed by 26% in the half, and by 37% in the second quarter alone — a deterioration that looks increasingly structural rather than cyclical, particularly as local rivals like BYD gain ground even in VW's home market.

The guidance cut on July 24 — with 2026 revenue now expected to fall 3% to 0% and deliveries to decline 3% to 7% — was the formal acknowledgment that the old trajectory was gone. Since that warning, the preferred shares have clawed back 4.8%. The stock closed Thursday at €74.88, up 3.6% on the day, though no single catalyst for that jump was identifiable. It now sits just above its 50-day moving average of €74.18 and roughly 8.2% above the 52-week low of €69.20 set in early July. The year-to-date loss remains steep at 28%, and the shares still trade about 31% below their twelve-month high of €109.10.

The Race Between Restructuring and Erosion

The central question for investors is whether the restructuring can feed through to margins faster than the demand slump erodes them. The "Group Target Picture 2030" plan unveiled in July — described as the most radical intervention in the company's history — envisions cutting overhead costs from roughly €45 billion (16% of automotive revenue) to about €34 billion (12%), paring the model lineup from around 150 vehicles to under 100, and shedding up to 50,000 additional jobs on top of a similar number of already-planned reductions. CEO Oliver Blume reiterated last week that at least half of the global job cuts should land in Germany, setting the stage for the talks now underway with works councils in Hanover, Osnabrück, Emden and Zwickau.

There are early signs the capital allocation discipline is taking hold. The automotive division generated a positive net cash flow of €3.2 billion in the first half, against a negative figure a year earlier. Net liquidity for 2026 is projected at €32–34 billion, and the Everllence windfall will bolster that further. If the overhead ratio falls to 12% by 2030 as planned, the operating margin could eventually reach 8–10% — more than double the current adjusted level of 4.3%.

What Could Derail the Narrative

The obstacles are equally visible. Labour resistance to the German job cuts is a live risk — delays in works-council negotiations would push savings further into the future. China remains the deepest structural worry, with the second-quarter delivery drop of 37% pointing to competitive disadvantages that no divestment program can fix. And while the ongoing US insider-trading case against two former VW engineers linked to the Rivian cooperation does not touch operational substance, it keeps governance questions in the headlines.

Product Offensive in the Background

None of this has stopped the product pipeline. In Brazil, VW unveiled the Tukan pickup, the successor to the Saveiro after 45 years, with production slated to start in 2027 as part of a 21-vehicle Latin American offensive through 2028. In Germany, hybrid versions of the Golf and T-Roc with 125 kW of power have entered pre-sales, with the Golf R-Line starting at €41,400.

For now, the market is giving management the benefit of the doubt — the recent share recovery suggests investors are prepared to credit the restructuring steps. But the path back to prior valuation levels runs through the works-council meetings of the coming weeks and the Everllence closing in late 2026. If those milestones slip, the guidance range of minus 3% to 0% revenue growth will come under renewed pressure, and the stock's fragile stability near the €74 mark could prove short-lived.