Volkswagen is in a weird spot at the moment. It's heavily investing in EVs, it has a new family of them making its way to market, and customers are buying them in large numbers. But the company's profits are hurting. So what gives?

The cold, hard reality is that its EVs just aren't very profitable. So even with massively improved EV sales—the company sold 209,100 of them globally last quarter, up 19.6% year-over-year—that doesn't help VW much. The company was blunt about that this week.

"The market success of our electric vehicles is putting additional pressure on our earnings, as we currently earn less from electric vehicles than from combustion-engine vehicles," said Arno Antlitz, VW Group's CFO and COO. "After nine months, our operating return on sales before special items stands at 3.8 percent. That is too low to continue investing strongly in our future."

This is the unfortunate truth of the EV market. The promise always was—and remains—that EVs are simpler machines and should be cheaper to manufacture than internal-combustion vehicles. But they're also expensive to develop and make at the moment. Obviously, those costs will go down as batteries get cheaper and as production scales up, and Tesla and some Chinese automakers prove that you can indeed make money selling EVs. But for now, VW and other legacy car companies are struggling to make the economics work. If VW wants to keep up with a growing global EV market, it needs to keep its foot to the floor.

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