CUPRA and sibling-brand SEAT have reported record sales and revenue but almost no profit in 2025 as tariffs, competitive pressure and substantial capital expenditure associated with converting key plants to build low-cost electric vehicles (EVs) wiped out earnings at the Volkswagen Group (VAG) subsidiary.
Operating profit at Cupra plunged to 1 million euros in 2025 ($A1.63 million), down from 633 million euros in 2024 ($A1.03 billion) despite posting record sales of 657,400 vehicles and record turnover of 15.3 billion euros ($A24.9 billion).
Executives told media including GoAuto that the decline reflected a deliberate investment phase as the business prepares to launch affordable BEVs while reshaping its production network.
“Let’s be clear: our results are not where we want them to be,” Cupra chief executive officer Markus Haupt said.
“They are also not unexpected. They reflect exactly the phase that we are in—an investment phase.”
Chief financial officer Patrik Mayer said profitability was squeezed by several factors, including a 20 per cent tariff levied by the European Union on the China-built Tavascan BEV, high production costs, and aggressive competition from Chinese carmakers.
Investment weighed heavily on the balance sheet as the company poured 1.3 billion euros ($A2.1 billion) into capital expenditure and R&D while transforming its Martorell and Pamplona factories for BEV production—as well as production of batteries at the former location.
As a result, net cash flow fell to –431 million euros (–$A701 million), highlighting the financial strain of electrification before new models hit the market.
However, Cupra says several factors should improve its financial performance this year.
A boost has already been secured in the removal of countervailing tariffs on the Tavascan, after VAG reached an undertaking agreement with EU regulators.
“The relief on the Tavascan is a big step forward,” said Mr Mayer.
Cupra’s big bet is the Raval, an affordable BEV hatchback set to launch in Europe this year. An Australian release is on the cards for 2027 or 2028.
Priced from 26,000 euros ($A42,000), the Raval will debut the new MEB21 platform, which underpins a family of small BEVs being built by SEAT/Cupra on behalf of multiple VAG brands.
Haupt described the Raval as “the backbone of our EV strategy”, saying the hatch is designed to democratise electric mobility while improving BEV margins by lowering costs.
Finance vice-president Mayer added that profitability for Cupra BEVs should improve as the new platform scales.
“Our margin on BEVs will look completely different with the Raval, and any other car that might come on this platform, than what we currently have in our portfolio,” he said.
VAG has now confirmed that SEAT/Cupra will take on long-term responsibility for upgrading MEB21 in future.
Despite its push into lower-cost BEVs, Cupra has confirmed it will maintain petrol and plug-in hybrid models alongside BEVs during the industry’s transition period.
“For us, it is super important to stay flexible during the next years, because the speed of acceptance of EVs, and the speed of infrastructure for charging, is different between countries.
“We are betting still on combustion for some countries…and we have plug-in hybrids as a very good transition technology.”
That strategy is relevant for Australia, where PHEVs help carmakers meet New Vehicle Efficiency Standard (NVES) limits while offering customers long driving range and the practicality of filling up at the bowser.
Cupra executives confirmed the brand is also examining additional hybrid technologies, including a range-extender electric vehicle (REEV) powertrain previewed by the Tindaya concept.
“Range extenders are being discussed,” said Mr Haupt.
“We need to take a very detailed look at the trend, and we need to make these decisions on a group level to ensure we have the right powertrains for the future.”
At the same time, Cupra is planning to continue its expansion into new markets—but the crown jewel of this strategy remains on hold.
In 2024, Cupra announced ambitions to launch in the United States by 2030, with a range of electric and hybrid vehicles, but the US plan was put on hold last year.
Executives say the project remains frozen due to geopolitical uncertainties. The US market has seen major shifts in EV purchase incentives and local vehicle production policies in recent years.
“We took a very bold decision to freeze the plans to enter the US,” Mr Haupt told GoAuto.
“We were convinced it was not the right time to take a decision that requires a big investment in that changing environment.”
For now, Cupra says its focus remains on stabilising profitability while retaining combustion and hybrid models for some markets and expending its electrified portfolio for others.
A target of six per cent return on sales has been set for 2030, with executives confident of gradually moving towards that margin goal over the next four years.