On Friday, local time, Volkswagen (VWAGY, Financial) announced a second downward revision of its annual performance forecast within three months. The company cited weaker-than-expected performance in its passenger car segment and increasing pressures.
Earlier this month, Mercedes-Benz and BMW also lowered their annual forecasts due to a deteriorating macroeconomic environment and weak market demand.
Volkswagen, Europe's largest car manufacturer, is grappling with significant financial challenges and market pressure. To control costs, the company is considering shutting down its car production and parts plants in Germany.
Currently, Volkswagen expects its 2024 profit margin to be around 5.6%, down from the previous estimate of 6.5% to 7%. Additionally, the company predicts a 0.7% decrease in annual sales revenue to €320 billion for 2024, compared to a previously anticipated 5% annual growth. Last year, Volkswagen reported sales revenue of €322.3 billion.
Citing the challenging market environment and underperformance in its passenger cars, commercial vehicles, and technical components brands, Volkswagen said it had to revise its outlook. The company now expects full-year vehicle deliveries to be 9 million units, down from the prior forecast of 9.24 million units.
This isn't the first time Volkswagen has cut its performance forecast this year. In July, the company was forced to lower expectations due to rising costs at its Brussels Audi plant, which is on the verge of closing.
The global economic downturn has severely impacted Germany's export-oriented economy. Additionally, skilled labor shortages, high energy prices, and competition from lower-cost Asian rivals have put pressure on German industrial giants like Thyssenkrupp and BASF.
Volkswagen is set to report its third-quarter results on October 30. The company currently expects its automotive division's full-year net cash flow to be around €2 billion, down from an initial estimate of €2.5 billion to €4.5 billion.
Meanwhile, Volkswagen is under additional pressure from Chinese automakers, who are gaining market share through aggressive pricing and the promotion of electric vehicles.
Volkswagen CEO Oliver Blume noted that the European automotive industry faces severe and challenging conditions, with a tougher economic environment and new competitors entering the market. He also mentioned that Germany's competitiveness as a manufacturing hub is declining, and Volkswagen needs to control costs further. The company indicated that plant closures could not be ruled out, as cost-cutting measures alone are insufficient to tackle the challenges it faces.
