Volkswagen Shares Surge Following Promising Trading Update

Volkswagen Stock Performance After Trading Update

Volkswagen shares saw an uptick of over 1% following the release of the company’s trading update for the fiscal year 2024. This announcement arrived ahead of the company's earnings report scheduled for March.

Optimistic Insights from Volkswagen Leadership

Analysts at Bernstein noted that Rolf Woller, Volkswagen’s Head of Treasury and Investor Relations, conveyed a more positive outlook compared to his counterpart at Porsche AG, which held its call the day before. This shift in tone signals potential growth and stability for Volkswagen in the upcoming year.

Impressive Order Book Statistics

The order book for Volkswagen in Western Europe has soared to around 850,000 units, surpassing pre-COVID figures. This robust number indicates more than three months of orders in hand. Among these, Battery Electric Vehicles (BEVs) constitute an impressive 170,000 units, reflecting stability on a quarter-over-quarter basis and showcasing a significant year-on-year surge.

Understanding Volkswagen's Sales Performance

In 2024, Volkswagen reported sales of 745,000 BEVs, accounting for 8.3% of its total deliveries. Although this was slightly below the company’s target range of 9-11%, it is important to note that BEVs now represent 21% of the total order book in Western Europe, suggesting a positive trajectory heading into 2025.

Financial Insights and Projections

According to Visible Alpha, the consensus for Volkswagen's fourth-quarter revenue and operating profit stands at €82.8 billion and €4.7 billion, respectively, with a margin of 5.7%. These projections align closely with the company’s guidance, which anticipates overall revenues of €320 billion and an operating profit of €18 billion for the fiscal year.

Commitment to Future Growth

During the latest briefing, Volkswagen reiterated its intention to enhance the free float of its Traton division. While specifics regarding the timing or scale of a potential stake sale were not disclosed, it highlights the company’s strategic focus on growth.

CO2 Compliance and Financial Challenges Ahead

Volkswagen, however, has indicated that it expects a €1.5 billion headwind in 2025 linked to challenges in meeting CO2 compliance standards. These challenges stem not only from potential penalties associated with targets but also from an increased number of lower-margin BEVs being sold in preference to higher-margin internal combustion engine (ICE) vehicles.

Future Margin Targets and Cost-Saving Initiatives

Bernstein analysts mentioned that Volkswagen’s recent union agreement is anticipated to have minimal impact on the company’s performance in 2024. Volkswagen’s long-term margin target of 6% for the VW brand is now viewed as more feasible in the medium-term perspective.

Workforce Reductions and Cost Benefits

The recent agreement outlines substantial cost-saving measures, including an annual savings of €1.5 billion until 2030, alongside a decrease in technical capacity in Germany by approximately 730,000 units. The workforce is expected to be reduced by over 35,000 employees, achieved through natural attrition and early retirement, with no forced layoffs.

Overall, Volkswagen expects to realize mid-term cost benefits exceeding €4 billion, leading to cumulative savings of more than €15 billion by the year 2030.

Frequently Asked Questions

What was the impact of the recent trading update on Volkswagen stock?

Following the trading update, Volkswagen stock rose over 1%, indicating positive investor sentiment.

How many BEVs did Volkswagen sell in 2024?

In 2024 Volkswagen reported selling 745,000 BEVs, which made up 8.3% of total deliveries.

What is Volkswagen's projection for its revenue in FY24?

Volkswagen forecasts total revenues of €320 billion for the fiscal year 2024.

What cost-saving measures has Volkswagen agreed upon?

The company has outlined personnel cost savings of €1.5 billion annually until 2030 and a reduction of the workforce by more than 35,000 through natural attrition.

What are Volkswagen's long-term profit margin targets?

Volkswagen aims for a medium-term target of a 6% margin for the VW brand.

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