Volkswagen (VWAGY, Financial) is facing increasing pressure as its passenger cars division underperforms. The largest European carmaker has downgraded its annual forecast for the second time in less than three months, citing weaker-than-expected performance. The company now expects global deliveries to be around 9 million units, down from the previous forecast of up to 3% growth to 9.24 million units in 2023. Sales are also expected to drop by 0.7% to €320 billion ($356.7 billion), initially projected to grow by up to 5%.
Volkswagen has adjusted its 2024 profit margin outlook to approximately 5.6%, down from the previous 6.5%-7% range and below the 6.5% forecast by LSEG. This revision reflects the challenging market environment, particularly affecting Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, and Technology Components brands. Following the announcement, Volkswagen shares briefly plunged by 1.7% in the U.S. market.
Earlier this month, Mercedes-Benz and BMW also lowered their annual forecasts due to weak demand in China, the world's largest auto market. This adjustment by Volkswagen, which holds majority stakes in Porsche and truck giant Traton, is the latest move in the auto industry. Two days ago, Volkswagen began crucial negotiations with Germany's strongest union, IG Metall, on wages and job security. This historic conflict could potentially lead to the first-ever shutdown of a Volkswagen plant in Germany.
Porsche SE, the holding company of the Porsche and Piech families and Volkswagen's largest single shareholder, also downgraded its rating outlook following Volkswagen's revision. The global economic downturn has hit Germany’s export-oriented economy hard. Along with a severe shortage of skilled labor, high energy prices, and competition from lower-cost Asian rivals, local industrial giants like Thyssenkrupp and BASF are under pressure.
These issues challenge Germany's established model of building consensus with powerful unions—a model seen as advantageous during demand growth but burdensome when cost increases outpace wage expectations. The auto industry’s fortunes and pressure from the Chinese market demand have become global concerns, affecting European carmakers striving to keep their factories running at full capacity.
Volkswagen is scheduled to release its third-quarter results on October 30. The company now expects net cash flow from its automotive division to be around €2 billion, down from the previous €2.5 billion to €4.5 billion range.
