VW cuts 2024 outlook as car demand falters

Move comes amid tough pay talks with unions

Volkswagen cut its annual outlook for the second time in less than three months on Friday, citing a weaker than expected performance at its passenger car division as pressure on Europe's top carmaker continues to rise.
Volkswagen cut its annual outlook for the second time in less than three months on Friday, citing a weaker than expected performance at its passenger car division as pressure on Europe's top carmaker continues to rise.
Image: Maja Hitij/Getty Images

Volkswagen cut its annual outlook for the second time in less than three months on Friday, citing a weaker than expected performance at its passenger car division as pressure on Europe's top carmaker continues to rise.

The lowered outlook is the latest from Germany's car giants, with Mercedes-Benz and BMW downgrading their annual forecasts earlier this month as a result of weakening demand in China, the world's biggest car market.

It also comes two days after Volkswagen kicked off crucial talks with IG Metall, Germany's most powerful union, over pay and job protection, a historic conflict that could lead to the first German factory closures in the carmaker's history.

Volkswagen expects a profit margin of around 5.6% in 2024, down from 6.5% to 7% previously and below the 6.5% LSEG estimate, while sales are expected to fall by 0.7% to €320bn (about R6,087,139,005,000) after the company had initially expected an increase of up to 5%.

Volkswagen said it was cutting its outlook "in light of a challenging market environment and developments that have fallen short of original expectations, particularly at the brands Volkswagen Passenger Cars, Volkswagen Commercial Vehicles and Tech  Components".

The German carmaker, which owns majority stakes in Porsche AG and truck giant Traton, also cut its outlook for global deliveries to around nine million, down from a prior forecast of a rise of up to 3% from 9.24-million vehicles in 2023.

Porsche SE, the holding company of the Porsche and Piech families that holds most of the voting rights in Volkswagen and is the carmaker's single biggest shareholder, also cut its own outlook in the wake of Volkswagen's downgrade.

Falling demand

Frankfurt-listed shares in Volkswagen and Porsche SE were trading 0.7% and 1.6% lower, respectively.

A softening global economy has hit Germany's export-oriented economy at a time when a painful shortage of skilled labour and high energy prices and cheaper Asian rivals have cranked up the pressure on local industrial heavyweights, including Thyssenkrupp and BASF.

The problems have also challenged Germany's tested model for consensual relations with powerful unions, seen as a strength in times of growing demand but turning into a liability of sorts when cost increases outpace salary expectations.

The fate of the auto industry and pressure from China are global issues, hitting Europe's car elite that has struggled with keeping plants running at full capacity.

In the US presidential election, Republican nominee Donald Trump has suggested China could dominate future auto production, while the Democratic President Joe Biden administration has accused China of flooding global markets with auto exports because of overcapacity and is proposing rules that would effectively bar nearly all Chinese cars from entering the US market.

Volkswagen, which is scheduled to report third-quarter results on October 30, said it expects net cash flow of its automotive division of around €2bn (about R38,090,935,680), down from €2.5bn (about R47,613,669,600) to €4.5bn (about R85,696,200,000) previously.


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