Volkswagen AG has issued its second profit warning in three months, signaling deepening challenges for Europe’s largest automaker. The company slashed expectations for revenue, profit, and cash flow on Friday due to weakening demand, predicting it will sell fewer vehicles in 2024 than in 2023—marking the fourth sales slump in five years.
This decline underscores Volkswagen’s difficulties, particularly its struggles with the shift to electric vehicles (EVs) and its shrinking market share in China, where local competitors like BYD have surged ahead. Volkswagen’s VW, Audi, and Porsche brands are losing relevance, especially in China’s rapidly evolving EV market, while competition from Tesla and Chinese EV makers continues to squeeze profits.
In China, once a key market for Volkswagen’s gasoline-powered cars, the company has failed to adapt quickly to the EV revolution, allowing local rivals to gain ground with innovative, affordable models. To counteract this, Volkswagen is closing plants, forging partnerships with Xpeng Inc., and promoting a new EV brand targeted at younger buyers.
Volkswagen’s premium brands, Audi and Porsche, have traditionally been profit drivers, but even these have started to falter, particularly in China, where Porsche’s sales fell 33% in the first half of 2024. The company now expects global deliveries to drop to around 9 million units this year, down from 9.24 million in 2023, reversing its earlier forecast of a 3% increase.
Chief Executive Oliver Blume is under pressure to make the company more competitive. Blume has scrapped job security pledges in Germany and is considering closing factories, potentially sparking a conflict with powerful labor unions. Volkswagen now forecasts an annual operating margin of 5.6%, down from a previous prediction of 7%.
The automaker faces headwinds from slower EV adoption in Europe, where reduced government incentives in countries like Germany and Sweden have caught manufacturers off guard. Chinese EV makers, with their low-cost offerings, are increasingly filling the gap in Europe’s lagging EV market.
Volkswagen's latest profit warning, coupled with a weaker cash flow outlook, raises concerns about the company's future, with analysts suggesting that restructuring and cost-cutting measures may accelerate in the face of declining performance.
Comments
Post a Comment