Automotive

Volkswagen postpones recovery until 2025. 'Strong competition'

Margins falling in 2023, no substantial recovery in the current year. Cfo Antlitz: 'Changed economic outlook'

by Finance Editor

1 March 2024

3' min read

Key points

Not much growth for margin
Operating profit +2.1% and deliveries at 9.24 million in 2023
Blume: clean-up work completed

3' min read

Volkswagen predicts a slowdown in sales growth in 2024 and joins the competition on a weakening economic outlook and the expectation of ever tighter competition. For CEO Oliver Blume, however, the path to restructuring has been mapped out, the real recovery will be seen from 2025. Europe's leading automotive group, ten brands including Vw, Skoda, Cupra, Audi and Porsche, estimates revenue growth of up to 5% in 2024, after a 12% increase to EUR 322.3 billion last year.

This growth suggests sales for 2024 of up to 338 billion. Not a big jump, but still higher than analysts' estimates (316 billion) gathered by London Stock Exchange Group.

Not much growth for the margin

The operating margin is expected to be between 7 and 7.5%, compared to 7.5 in 2023 and 7.9 in 2022. The Automotive Division's net cash flow is expected to be between 4.5 and 6.5 billion and net cash between 39 and 41 billion.

The chief financial officer of the Wolfsburg Group, Arno Antlitz, spoke of a 'changed economic outlook' and 'intense competition' in 2024. "The results for the financial year 2023," he said, "show that we have become even more solid. We have excellent products and have launched ambitious Group-wide efficiency programmes. Therefore, we are confident for 2024, despite the less than encouraging economic outlook and intense competition."

These assessments are in line with those of major rivals, including Mercedes-Benz and Stellantis, which have adopted a similar tone in their narratives of 2023 results and estimates for the current year.

The Bernstein analysts' reading is less pessimistic. Volkswagen's outlook looks 'slightly positive', in line with that of its European peers, while results for 2023 were broadly in line with expectations, Bernstein analysts write in a note. The guidance for 2024 is more optimistic for top-line and slightly more optimistic for margins.

European car manufacturers have been put under pressure by US rival Tesla on the electric car front and looming Chinese competitors, at a time when the electric car seems to be losing momentum with falling demand and the end of incentives, starting with Germany. For Volkswagen, moreover, the Dragon market is crucial (Wolfsburg is investing billions), as CEO Oliver Blume has repeatedly said, but this year it has lost its historic leadership to BYD.

Operating profit +2.1% and deliveries at 9.24 million in 2023

As for the other results for 2023, operating profit was 22.6 billion, up 2.1% year-on-year. Revenues rose 15.5% to 322.3 billion and deliveries totalled 9.24 million units (+11.8%) compared to 10.3 million (+7.7%) for the world number one, Toyota.

Deliveries of Bev (Battery electric vehicles, pure electrics) rose by 35% to 771 thousand units, accounting for 8.3% of total production. Net cash flow in the Automotive division more than doubled to EUR 10.7 billion, supported by a strong inventory reduction at the end of the year. Net cash in the Automotive division was EUR 40.3 billion at the end of the year, after dividend payments of around EUR 11 billion (43 in 2022).

The Board of Management and the Supervisory Board will propose to the shareholders' meeting a dividend of EUR 9 per ordinary share and EUR 9.06 per preference share, corresponding to a payout ratio of 28 per cent.

Blume: Clean-up work completed

"2023 was an important year for the Volkswagen Group in terms of realignment. Last year we continued to implement our 10-point programme. The "clean-up" work has been completed. The main road to restructuring the Group has been mapped out. We can start from here in 2024 and have a solid basis for an accelerated recovery from 2025,' commented CEO Oliver Blume.

The ordinary shares closed down 3.68% at EUR 139.9. Ordinary shares themselves are in the red by 15.5% over the past 12 months.