**Continental AG Adjusts Profitability Targets Amid Rising Costs**
Continental AG has revised its profitability forecast for the year, citing increased expenses stemming from U.S. tariffs imposed during Donald Trump’s presidency. As the German automotive supplier moves forward with plans to restructure, it now anticipates an adjusted EBIT margin of up to 11% for fiscal 2025, down from a previous estimate of 11.5%. This adjustment was announced ahead of an investor meeting in Frankfurt and reflects currency fluctuations, reduced revenue expectations from its ContiTech industrial unit, and the impact of U.S. tariffs on its tire business.
CEO Nikolai Setzer highlighted the challenges posed by tariffs on imports from Europe, which have been in effect since early May, as well as the additional costs associated with steel and aluminum duties. “That leads to higher production costs in the U.S.,” Setzer explained during a press call.
As Continental prepares to list its car parts division, Aumovio, in September and sell its ContiTech unit next year, the company is recalibrating its earnings expectations to focus exclusively on its tire operations. This strategic shift marks a significant departure from decades of acquisitions and is part of a broader reorganization within Europe’s automotive sector, which is grappling with tariffs, increased competition from China, and rising labor and energy costs.
In response to these market conditions, competitors such as ZF Friedrichshafen AG and Robert Bosch GmbH are also implementing job cuts and factory closures, while automakers like Porsche AG and Volkswagen AG are scaling back production to address declining demand in their home markets.
Continental has indicated that proceeds from the sale of ContiTech may be utilized for special dividends and share buybacks, while also announcing new sales and profit targets for its tire and ContiTech operations. Over the next three to five years, the company envisions consolidated sales reaching as high as €22 billion, with an adjusted EBIT margin of up to 14.5%. The latest mid-term targets, set in 2023, projected sales of €18 billion for the tire unit and €9 billion for ContiTech, although these figures included contributions from OESL, a business generating €1.9 billion in revenue last year, which is set to be sold in the latter half of the year.
Setzer acknowledged the current market challenges, stating, “The markets are weaker than what we expected back then,” pointing to a slowdown in demand for cars and tires in Europe. He also noted the uncertainty surrounding the impact of tariffs in the U.S.
As Continental aims to become a more agile manufacturer, it plans to focus on high-performance tire sales while expanding its presence in Asia and North America, divesting from less promising sectors. The company has already announced its exit from agricultural tires and the cessation of truck tire production in India. ContiTech, which employs nearly 40,000 people globally, produces a wide range of rubber and plastic products. The upcoming listing of Aumovio, announced last August, follows years of challenges related to high investment needs, declining demand, and fierce competition. The tire division remains Continental’s most profitable segment, generating the majority of its revenue.
**FAQ**
**What factors led to Continental AG lowering its profitability target?**
Continental AG lowered its profitability target due to rising production costs from U.S. tariffs, currency fluctuations, and reduced revenue expectations from its ContiTech unit.