VW stock lower as auto giant cuts sales forecast, refocuses China efforts
Shares of global auto giant Volkswagen (VOW3.DE) are slipping today after the company cut its global delivery forecast as it tries to control higher input costs and a new strategy in the all-important Chinese market.
For the first half of the year, Volkswagen reported global revenue of 156.3 billion euros, up 18% from a year ago, driven by “significantly higher vehicle sales in Europe and North America,” the company said. However, operating profit fell 13.9% to 13.18 billion euros for the first half, and while net cash flow was up 7.7%, it tumbled 71.8% in Q2.
Volkswagen confirmed its financial outlook for FY 2023, but cut its global delivery forecast to 9 million to 9.5 million from 9.5 million.
“The focus for the second half is now on strengthening net cash flow,” Arno Antlitz, Volkswagen Group CFO and COO, said in a statement. “With the launch of performance programs at all brands and our strategic decisions in China, we will improve the competitive position of the Volkswagen Group even further.”
In China, Volkswagen delivered a total of 1.452M vehicles (down 1.2% compared to the previous year) in the first half of 2023, however the company said delivery figures from March through May were “significantly up” compared to a year ago. The China market is extremely important for VW, accounting for 40% of its global sales and half of its profit.
Last year, Volkswagen lost its crown as the top automaker in China, overtaken by the surging BYD. BYD has stretched its lead over VW in Q2, selling more than 595K hybrid or fully electric models, compared to the 544K sold by Volkswagen.
With the China market under threat, Volkswagen on Wednesday forged a strategic partnership with local automaker Xpeng to develop two new models for VW on the mainland. VW will in turn pay $700 million for a 5% stake in Xpeng. Separately, VW luxury brand Audi expanded its EV cooperation agreement with local automakers like FAW and SAIC.
Turning to the overall cost side, VW said supply chain disruptions have eased in Q2, though issues like semiconductor shortages and transportation and logistics delays remain. The company sees raw material costs and logistics issues improving in the back half of the year, and “performance programs” to boost efficiencies and cost cutting will also be a focus.
“Prioritizing sustainable profitability over volume growth will enable the group to meet operating margin and cash flow targets,” the company said in its earnings statement.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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