Volkswagen is expecting to be profitable by 2023, however, there are increasing concerns about whether this will be achieved.
After VW announced their optimistic projections for earnings in 2023, their stock surged forward, however it soon stalled after they exposed their costly plans and the potential financial impacts on Europe were not great. Tesla's price competition [...]
![The VW ID.2 small concept electric car is expected to launch by 2026. (Photo by Marcus ... [+] Brandt/picture alliance via Getty Images)dpa/picture alliance via Getty Images](/uploaded_images/f16745a36acfbd566718b520350b0d25_1679234583.jpg)
Tesla's price war is shaking up the electric car market, putting Volkswagen squarely in the crosshairs. With Tesla's new, more competitive prices, the profitability outlook for electric cars is changing rapidly and VW is feeling the heat. Analysts are predicting that VW will have to adjust their pricing model and make other strategic decisions in order to remain competitive in the electric car market.
Earlier this month, Volkswagen (VW) sent its investors into a frenzy with their announcement of a projected 10-15% sales growth for 2023 and an operating profit margin of 7.5-8.5%, compared to the 7.9% reported in 2022. The news caused VW's stock to surge by 13 points, bringing the price to €142, as investors' outlook on the automotive industry quickly shifted to the optimistic. Last week, the German automotive giant furthered their plans for the coming years with a €180 billion ($191 billion) 5-year spending plan. This ambitious plan includes plans for battery production and the U.S. market. With this projection in mind, the future looks bright for Volkswagen and their shareholders.
UBS investment bank has raised questions over Volkswagen's reliance on pent-up demand later this year. The bank warned that the automaker might be taking a risk by relying too heavily on the pent-up demand, as the potential outcomes are largely unpredictable. UBS analysts have recommended that Volkswagen should be prepared to adjust its strategy in order to mitigate any potential risks.
UBS has issued a warning against relying on pent-up demand to drive business operations as it carries significant risk of overproduction and overspending. According to a report released by the financial services firm, UBS stated that relying on pent-up demand would be a risky bet and could have dire consequences for companies. They warned that overproduction and overspending could be severe outcomes if businesses choose to rely too heavily on pent-up demand.
Volkswagen's attempts to cut costs in its production have been deemed lackluster in comparison to its competitors. Despite the German automaker's attempts to reduce costs, other companies have been able to outpace them in terms of cost-cutting measures.
Volkswagen's prospects look positive according to Bernstein Research, with falling raw materials prices providing a boost to profits. However, a large capital spending program is presenting some headwinds to the company. Analysts note that this program is necessary to ensure the company's long-term success, and that the benefits of the cost savings should outweigh any short-term expenses.
Bernstein analyst Daniel Roeska has commented on the challenging margin guidance given by a company, with regards to slightly diluted mix and higher BEV (battery electric vehicle) sales. However, the company signalled that the cost run-rate for 2023 would be substantially lower than the exit rate in Q4, and expects declining prices for aluminum and steel to help maintain flat margins in '23. Roeska said in his report that the company is confident that the combination of the lower costs and operating leverage will be enough to achieve the flat margings in 2023.
Professor Ferdinand Dudenhoeffer, director of Germany's Center for Automotive Research, has recently expressed his doubts about Volkswagen's ability to meet their profit targets. According to Professor Dudenhoeffer, the profit from Porsche won't be enough to compensate for the struggles of the Audi brand, and the other mass-market producers, such as SEAT. Furthermore, Audi's new product pipeline has been slowed down, exacerbating the situation. Professor Dudenhoeffer's remarks are likely to put additional pressure on Volkswagen to meet their targets.
Automakers are expecting an increase in competition in the next few years due to Tesla's introduction of electric vehicles (BEVs). According to Ferdinand Dudenhoeffer of the Center for Automotive Research, this competition could have a significant impact on profits for automakers. "The greatest pressure on profits in the next few years is likely to come from BEVs. The reason is Tesla's dumping competition," Dudenhoeffer said.
Tesla Inc. announced today they would be cutting prices on some of their products in order to put pressure on their competitors. The electric car maker stated that they were leveraging their superior efficiencies to achieve this, not engaging in any sort of dumping. This move by Tesla will likely affect the entire industry, as they are the leader in electric car production. Competitors will need to find ways to adjust in order to remain competitive. Tesla's cutting of prices is yet another testament to their commitment to innovation and their ability to stay ahead of the curve.
Investment bank Metzler's auto analyst Jürgen Pieper has a pessimistic outlook on Volkswagen's future profitability, despite the company's history of managing to stay profitable even in difficult economic situations. Pieper's opinion is shared by many economists, who expect the German economy to improve in the second half of the year. With the potential for a strong economic turnaround, Pieper and other analysts will be closely watching Volkswagen's performance in the coming months.
Volkswagen is still lagging behind its competitors when it comes to e-mobility, and the company has yet to make a mark with an impressive product. But according to VW's deputy CEO, Thomas Pieper, the ID.Buzz model could be the game changer that the company has been waiting for. In an email, Pieper expressed his hope that the ID.Buzz would help VW turn things around in the e-mobility sector.
Swiss financial giant UBS is concerned about Volkswagen's electric car strategy, citing the increased spending of €21 billion ($22 billion) as a potential cause for alarm. This amount exceeds the company's previous 5-year plan ending in 2026, leading UBS to question whether or not the strategy is sustainable. UBS believes that the new plan may be too ambitious and could lead to costly mistakes if not managed correctly. Despite the concerns, Volkswagen remains confident that its electric car strategy will be successful, and will continue to invest heavily in the technology.
Volkswagen (VW) may be facing a troubling future as electric vehicle (EV) leaders race ahead in cost reduction, according to a report by UBS. The report suggests that VW's evolutionary approach to EV development is at odds with the rapid innovation of its competitors, such as Tesla, which has a 50% cost reduction target. This could leave VW with stranded assets that don't allow for profitable mass-market BEV production, potentially leading to dire consequences for the company. UBS warns that this approach could be the difference between success and failure for the German automaker.
