Volkswagen: Profit Warning, Cost-Cutting Measures and Tailwinds for Electric Vehicles
On September 18, Volkswagen pulled the ripcord. The operating return on sales is expected to reach a maximum of 1% by 2026. Previously, the Wolfsburg-based company had targeted 4.0 to 5.5%; last year, it was 2.8%. This is due to one-time charges of approximately EUR 10 billion. Of this amount, about EUR 6 billion is attributable to a goodwill write-down related to Porsche AG, and EUR 2 billion to restructuring costs, including in China. According to VW China CEO Ralf Brandstätter, the auto market there is expected to shrink by one-fifth by 2026. On an adjusted basis, the margin would be around 4%. The company is sticking to its net cash flow target of EUR 3 to 6 billion. The cash position is solid.
On September 4, the Supervisory Board unanimously approved the 2030 Future Plan. Group-wide, the company will cut an additional 50,000 jobs, about half of them in Germany. The model lineup is set to shrink by about 50% by 2035. Investments totaling EUR 135 billion are planned for 2027 through 2031, about EUR 30 billion less than in the previous 5-year period. For Neckarsulm, Zwickau, Emden and Hanover, no follow-on production is guaranteed between 2031 and 2034. By 2030, the operating profit margin is expected to climb to 9%, up from 3.8% in the first half of 2026. There is still a long way to go.
Electric mobility is providing a boost. At the main plant in Wolfsburg, where primarily internal-combustion vehicles are currently rolling off the assembly line, production is about 30,000 vehicles below plan. By contrast, the electric vehicle plants in Emden and Zwickau are operating at higher capacity. In Emden, at least two special shifts are scheduled for the ID.7. With Skoda and Cupra, there are more than 100,000 orders for the new electric compact vehicles, over 40,000 of which are for the ID. Polo. However, Volkswagen earns less from electric models than from comparable internal combustion engine vehicles because the batteries are expensive. The question, therefore, is whether demand will be sufficient to secure the long-term future of the Emden and Zwickau plants.
HPQ Silicon: Wins Contracts from the Military and Drone Defence Sectors
Montreal-based HPQ Silicon specializes in silicon-based materials. Its business rests on three pillars: anode material for lithium-ion batteries, pyrogenic (fumed) silica derived from quartz, and hydrogen production technologies. The company has made the most progress with batteries, and this is where its partner Novacium comes into play. How does HPQ benefit? It holds a 36.8% stake in the French anode specialist and has exclusive rights to market its technology in Canada, the US, and Mexico under the HPQ ENDURA+ brand. Any success in France thus plays into the Canadians’ hands. There have been several such successes recently.
On September 22, HPQ reported that the French Army’s Technical Section had awarded Novacium a contract in late June for prototype batteries for tactical radios. The requirement is for significantly more capacity, ideally double, without having to replace connectors or chargers. Initial samples delivered 23% more energy than the comparable battery in April 2025. As early as September 17, it had become known that drone defence specialist Alta Ares had ordered more than 100 battery packs for its X-Lock interceptor drone. The packs are lighter than the previous solution while delivering at least the same performance. Things seem to be taking off.
On September 10, Novacium announced a collaboration with Tokai COBEX Savoie, part of Japan’s Tokai Carbon Group. Together, they are exploring whether Novacium’s silicon can be combined with climate-friendly graphite produced in France to create a complete anode material. If this partnership succeeds, it could result in an anode developed and manufactured entirely in France. On August 27, HPQ and Novacium each delivered ten custom battery packs to three European drone manufacturers. This marks the final planned round of testing prior to potential product qualification. The pipeline is filling up.
AeroVironment: Batteries, Lasers and Full Order Books
For military drones, onboard power determines operational value. This is demonstrated by AeroVironment’s P550. On July 20, the company received a production contract from the US Army worth USD 117.3 million for 82 of these all-electric vertical takeoff and landing drones. The P550 can fly for more than five hours on a single battery charge, and both the battery and payload can be swapped out in under five minutes without tools. For cell technology, the company collaborates with Amprius on its silicon anodes. According to the company, this increased the flight time of the VAPOR unmanned helicopter from 75 to 120 minutes. The group does not have its own battery business. The battery is a means to an end.
In the first quarter of fiscal year 2027, revenue rose 6% to USD 480.5 million. The driving force was the Autonomous Systems segment, which grew by 21% to USD 346 million. In contrast, Space, Cyber, and Directed Energy fell 21% to USD 134.5 million and slipped into the red, with adjusted EBITDA of USD 8.9 million. This reflects the impact of the SCAR contract, which was completed in March. Group-wide, adjusted EBITDA stood at USD 53.4 million, and operating cash flow turned positive at USD 13.5 million. By comparison, a year earlier, USD 123.7 million had flowed out. Drones are driving the group’s performance.
The question remains: Will the acquisition of BlueHalo pay off? On September 2, the US Army awarded a USD 464.8 million contract for the LOCUST lasers developed by BlueHalo for drone defence. According to the company, this is the first US production contract for high-energy laser weapons. On September 8, the first international contract worth more than USD 50 million followed. As early as August 26, the Army ordered 600 Switchblades for USD 51 million, partly for a US ally. At the end of the quarter, the funded order backlog reached a record USD 1.5 billion. If the company succeeds in manufacturing the lasers profitably in series production, the second segment could also regain momentum. Demand is strong.
The race for the best batteries is spreading to more and more industries, which is sure to accelerate developments. Volkswagen is struggling with a profit warning and cost-cutting measures, but full order books for electric vehicles and the company’s restructuring could bring about a turnaround if margins hold. HPQ Silicon is increasingly positioning itself as a supplier for military and drone projects with silicon anodes and its partner Novacium. Overall, the company has three promising business segments. AeroVironment impresses with record orders, laser technology, and in-demand drones, but profitability in the second segment remains the litmus test.
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