Volkswagen AG may still be the world’s second largest automaker in the world after Toyota but negative macro trends have been taking a toll on the German automaker, changing the auto landscape and industry structure. Such interferences include Trumps 20% tariff threat on all EU made cars which he wants implemented by November 2018. The UK, Volkswagen’s second biggest market in Europe, recently introduced a new initiative that will end sales of diesel and petrol cars by 2040. If fully implemented, at least 50% of news cars sold in the UK must be ultra-low emissions by this date. For Volkswagen and other automakers, the threat is clear; move to electric or perish. The company has also paid more than $25bn in fines and damages related to its 2015 ‘diesel-gate’ scandal, an amount that excludes the threat of future financial compensation from civil litigation.

These are some of the macro factors that could undermine Volkswagen. But the more critical factors, that are also major determinants of industry profitability include the five forces and their impact on indivdual firms. In this report, we look at the five forces and how they are affecting Volkswagen AG.