September 27, 2024 03:28 PM
VW’s outlook cut adds to the challenges for CEO Oliver Blume, who has warned costs in Germany are too high as EV growth slows and Chinese rivals push into Europe.
Volkswagen Group cut its annual guidance for a second time this year on weak demand for its passenger cars, marking the latest blow to Germany’s struggling automotive sector.
VW now sees an operating margin of 5.6 percent. That’s down from a prediction of as much as 7 percent in July, when the company lowered its expectations partly due to expected costs from closing an Audi plant in Belgium.
All three major German carmakers — VW, Mercedes-Benz and BMW — have now warned about their profit in recent months. They are each struggling with slower sales in China, where buyers are holding back because of a deepening real estate crisis.
Rising competition in electric vehicles also is driving steep discounts and crimping margins, all while declining consumer confidence saps demand for combustion-engine cars.
VW’s outlook cut adds to the challenges for CEO Oliver Blume, who has warned costs in Germany are too high as EV growth slows and Chinese manufacturers led by BYD push into Europe.
The automaker is considering plant closures in Germany for the first time and has scrapped decades-long job security pledges as it tries to become more competitive. Executives have flagged about two car plants’ worth of excess capacity, which put them on course for a protracted conflict with powerful unions.
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VW said its namesake passenger-car brand and its commercial vehicles unit are performing below expectations. It flagged added risks for its volume group that also comprises Skoda and Seat, citing a “deterioration in the macroeconomic environment.”
VW’s global deliveries will drop to around 9 million units this year, from 9.24 million in 2023, VW said on Sept. 27. The automaker had previously forecast a 3 percent increase.
VW now expects net cash flow in the automotive division to reach around €2 billion ($2.2 billion), down from as much as €4.5 billion previously, partly because of M&A activities including a partnership with Rivian Automotive on EV technology.
Sales are expected to fall by 0.7 percent to €320 billion euros after the company had initially expected an increase of up to 5 percent.
Reuters contributed to this report
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