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Volkswagen brand confirms that it’s postponing the 6.5% operating return on sales target by 3 years
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Volkswagen brand confirmed Handelsblatt report that it was postponing the operating return on sales target of 6.5% to 2029 from 2026.
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Powel said achieving margin positive with the small cars will be hard but they are confident that they will (min 49:30).
“With small cars, the 6.5% margin expectation is a big one,” Chief Financial Officer David Powels said. “And we are confident that we can meet this forecast.”
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CEO Thomas Schafer said by 2027 they aim to have lowered battery cost by 50% compared to 2023 (min 5).
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Powels said they have already reduced factory costs by 3% y/y partly by eliminating night shifts at selected plants (min 26:25), reduced overhead costs to 9.2% from 9.4% in 2023, reduced the number of positions globally by 4,200 (40% in production, 30% in administration, and 20% in overseas regions)
Assessment
If they manage to reduce costs by 50%, then their EVs will be very competitive since batteries account for about 40% of an EV cost. It’s good to see that they have already implemented performance program measures. However, the benefits look muted considering that they now expect to achieve their 6.5% return on sales target in 2029 instead of 2026. They must be expecting significant margin dilution from the upcoming BEVs.
Q4 2024 Volkswagen brand earnings call
Q4 2024 Volkswagen brand earnings notes