Volkswagen Group deliveries rose by 3.1% y/y to 2.1 million vehicles in Q1, boosted by China whose deliveries rose by 7.3% to 693,600 vehicles.
Analysts believe that China deliveries benefited from price cuts, which Volkswagen callsed “customary and time-limited marketing measures”.
Porsche deliveries fell by 3.9% y/y to 77,600 vehicles due to continued challenging market situation in China and delays in delivery due to regulatory requirements in North America.
Audi deliveries declined by 4.5% y/y to 396,900 vehicles, probably due to the semiconductor issues mentioned by the Volkswagen during its [latest earnings call]
In Q1 2024 more than twice as many all-electric models were ordered as in the same period last year (+154 percent), so that the BEV order bank currently stands at around 160,000 vehicles
Volkswagen Group will bring 30 new models in 2024. I have analyzed some of the facelifts and the 2024 Porsche Panamera, Volkswagen Passat and Skoda Kodiaq seems to have received good reception from customers. The other upcoming facelifts will come with minor tweaks such as improved performance and better tech. Volkswagen is increasing prices for these models with minor changes as well but in a sensible manner eg addition of some 500-2000 euros.
Based on the above findings, macro, competition, etc, I tried to forecast the unit sales and pricing for 2024 and 2025 for each brand. I also updated the valuation model to reflect the unit sales and pricing estimates. For 2024, I expect Volkswagen Group revenue to grow by 4.5% y/y to 336.7 billion euros, operating return on sales of 6.98% and diluted EPS of 31 euros. The 2024 operating performance will likely benefit from Skoda, SEAT and Volkswagen Passenger Cars unit sales.
For 2025, I expect Volkswagen Group’s revenue to grow by 12.4% y/y to 378.5 billion euros, operating return on sales of 7.5% and diluted EPS of 38 euros. I expect the 2025 operating performance to be driven mostly by Audi. I forecast 2025 Audi revenue to grow by 21% y/y to 77.1 billon euros driven by weak comps and pick up of deliveries of its highly anticipated models.
I will continue assessing the other models and update the model accordingly.
N/B: Volkswagen Group is guiding for sales revenue of 338.4 billion euros (+5%) in 2024 and operating return on sales of between 7% and 7.5%.
@Magaly What is your high-level macro take on that? Do you think it is possible that car sales will stay stable or expand in the next two years or do you see strong headwinds to demand?
I think there is a significant probability they will remain stable but with very slow growth at the same time.
The most likely scenarios due to the macro backdrop for the next two years that currently see are: a slow but growing car sales or a decline in sales due to a recession. I don’t see the catalyst for strong growth, because I don’t see a significant decline in rates unless a recession happens, and supply/demand has come to a better balance now, and prices remain relatively high.
That why for me a 12% growth for VW in 2025, sounds very optimistic, but I have to acknowledge that I don’t understand the company well enough to know with certainty if new models could have the potential to boost demand so much above the industry.
These are also S$P mobility projections, which show slow growth for the next few years
Interesting take. Your comment on demand/supply coming into better balance is particularly insightful on Audi which benefitted from improved supply situation last year. Just some questions;
Won’t ECB starting to cut rates bring some optimism to consumers? Won’t they start spending more thinking better days are coming?
How reliable has S&P forecasts been? I just found out that they forecasted growth rate of 5.6% at the beginning of 2023, that’s almost 4% lower than the actual. Also, what has been the correlation between global light vehicle sales and Volkswagen deliveries. I noticed that Volkswagen deliveries outperformed global light vehicle sales by around 2% in 2023. I am not sure if the two are comparable.
What’s your probability of a recession occurring this year or next year?
Clarify for me your above statement on pricing, do you mean you expect pricing to stay high in 2024 and 2025?
Rate cuts are stimulative, yes, but it is not as straightforward as one could think, the same as there are lags to rate hikes, there are also lags to rate cuts in the economy (to a lesser extent).
A few rate cuts will not cause a huge demand surge, as rates will still be relatively high compared to pre-COVID levels, though they will help support positive growth.
If they have to do aggressive rate cuts, this usually indicates a recession, meaning sales may decline first before they eventually improve.
The ideal scenario is one where significant rate cuts can occur because inflation is falling without a recession. However, I consider the probability of a soft landing to be very low (below 10%). That said, I’m not ruling it out entirely, but I am currently assuming a more conservative outlook.
All forecasts will usually be wrong, so we can’t take them at face value never. Instead, we need to consider whether the sales conditions of 2023 will persist to produce similar results in the coming years, which, in my opinion, is more unlikely. Some of the things I am thinking are:
Supply chain issues will mostly be resolved, and inventory levels for new cars is increasing coming already back to normal
There is little pent-up demand remaining, and consumers no longer have substantial COVID-era savings. There is still catching up to do to prior peak sales levels, but I think will be a more gradual increase from now on.
Interest rates, even with a few cuts, remain high compared to pre-COVID levels, central banks have been clear to stay high for longer, so the delayed effects of these high rates could start impacting the economy more strongly.
Expectations of lower rates and prices could make consumers delay purchases until they feel they have normalized.
However, Even if the market outperforms the forecasts by 4% again, it will still be at most a 7-8% growth for 2024 and 2025.
And we have to keep in mind they could be wrong in both directions, not only up.
To assess VW’s correlation with global sales, we would need the data series for both metrics to make a comparison. I’m not sure if this data is readily available, but I can look into it.
While VW might outperform the industry by a few percentage points, significantly exceeding the industry would require a substantial increase in market share, which I don’t believe reflects its current situation.
Additionally, you are projecting revenue, not just sales. If you anticipate that new models will significantly raise average prices due to new features?, this projection makes more sense to me.
I have been given a 60% probability of a recession in the next 2 years for the US. However, I don’t have the same depth of knowledge about Europe or China to make a confident prediction or draft clear scenarios for those regions.
Regarding prices, it’s important to distinguish between price levels and inflation. While car price inflation may improve or even decline for a while (as I expect), the overall price level will likely remain high due to the significant post-COVID increase, impacting affordability.
Given the improved supply-demand balance, current price pressures, increased competition, higher interest rates and elevated price levels affecting affordability, and a more soft global economy, I would prefer more conservative estimates for the next two years. However, my perspective is based solely on macroeconomic factors, and you are the one who understands the company better.
And as always we need to think in scenarios and probabilities because anything can happen under the right circumstances.
Volkswagen recalls 307,000 units of Atlas over air bag sensor wiring
Volkswagen is recalling over 271,000 vehicles sold in the U.S, the U.S. National Highway Traffic Safety Administration (NHTSA) said.
“The passenger occupant detection system (PODS) may experience a fault in the wiring and deactivate the front passenger airbag when the seat is occupied,” the statement reads.
The affected vehicles are the 2021-2024 Atlas and 2020-2024 Atlas Cross Sport.
The statement said Volkswagen will replace the faulty parts at dealership shops free of charge.
Volkswagen is also recalling 36,000 units of the same model in Canada over the same issue.
Last year April, 143,053 units of the same model were recalled over the same problem in the U.S.
In May 2024, 80,000 units of the 2021-2023 ID.4s were recalled in U.S due to a software glitche.
In February 2024, 261,000 units of Audi A3, VW Jetta and VW Golf were recalled due to a fuel pump problem.
In March 2022, 246,000 Atlas units were recalled due to the airbag defect.
Assessment
It looks like the recall situation doesn’t look good for Volkswagen in the United States. The Atlas which is Volkswagen’s best seller in the United States with 95,000 units sold in 2023 has been severely impacted by the recalls. Although Volkswagen is not expected to incur a lot of repair costs in these models, the recalls could ruin its reputation in the country.
From my understanding, recalls are something that happens pretty regularly for all automotive manufacturers.
I would, therefore, be interested in some statistics that help us see the larger picture.
The major question to answer is: How many recalls did each of the major manufacturers have per region & globally in the last years (ideally 10+) in absolute numbers and in % of all cars sold? Which % of those recalls have been crucial vs. minor?
Depending on how easy it is to find great sources, we can answer this question more granular vs. more surface-level.
Once we have that, we will know if Volkswagen’s numbers have been particularly high in recent years compared to its own past and to competitors.
@moritz in response to your question here, product updates are either generational changes or facelifts. Generational change involves a significant overhaul of the product such as changes in powertrain and a complete redesign of the vehicle while facelifting usually result in minor changes such as minor tweaks on the exterior and the interior. Out of the over 30 model updates in 2024, generational change will only occur on the Panamera, Macan, Tiguan, Passat, Skoda Kodiaq and Skoda Superb. The Audi Q5 is also moving to a new generation. However, it is hard to differentiate the changes made to the Q5 with that of a facelift.
In comparison to the previous upgrades, I would say Porsche 2024 product changes look significant while that of Audi are mostly minor. The magnitude of Skoda product changes in 2024 looks unchanged from that of the past. But Skoda product changes have mostly been significant. The other Passenger Cars’ 2024 upgrades such as those of the Jetta, Atlas and Golf are minor. But it’s argued that issues in the prior Golf have been rectified in the 2024 upgrade.
Porsche deliveries fell by 7% in the first-half of 2024
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Porsche deliveries fell by 7% to 155,945 units in the first-half of 2024, impacted by the transition to new models and tough economic conditions in China.
Deliveries only grew by 1% quarter-over-quarter with deliveries of Panamera and Taycan rising by 16% and 9%, respectively. Porsche didn’t give their Q2 or 2024 deliveries outlook but based on the tone of their Q1 earnings call, it appears the delivery numbers in Q2 was weaker than expected.
“Reflecting our robust order book and improved availability of the new Panamera and Taycan, we have a good foundation for a sequential stronger unit sales, revenues and profitability starting in Q2 2024 and delivering a better second half of 2024,” Lutz Meschke, Chairman of executive board said in the Q1 2024 earnings call transcript.
The decline of 7% in the first-half is below my forecast of -1% for the full year. Though, I expect deliveries in the second-half to improve as the new Panamera and Taycan reach different regions, I doubt that my forecast for the full-year will be achieved. This is because there’s continued weakness in China and there are other models (Macan and 911) that will start deliveries in the second-half and would likely be affected by the transition as well. Macan and 911 accounted for 43% of Porsche deliveries in 2023 while Panamera and Taycan accounted for 23%. Part of the transition headwind in the second-half will be offset by deliveries of Cayenne though (since second-half of last year was a weak period for the Cayenne due to the transition to a new model).
Volkswagen Group deliveries were were down 3.8% in Q2, full-year guidance reiterated
Volkswagen Group Q2 deliveries fell by 3.8% y/y to 2.2 million units driven mostly by Audi (-11.3%) and Porsche (-9.6%), Q1 deliveries were up by 3.1% y/y to 2.1 million units.
In H1, deliveries were flat (-0.6%) at 4.4 million units.
The company reiterated its guidance for a slight increase in deliveries in 2024.
"For the full year 2024, we continue to expect a slight increase in global deliveries compared to the previous year due to the launch and ramp-up of numerous important models in the second half of the year.”
Deliveries to Chinese customers fell by 7.4% and 19.3% y/y to 1.3 million and 651,500 units in the first half and Q2 respectively while deliveries at Western Europe (H1: +2.3%) and North America were stable (H1: +7.9%).
Assessment
In the past two years, deliveries in the second half have been better than in the first half by around 400,000 units. That means Volkswagen Group’s unit sales in 2024 could easily end up being flat compared to 2023, in-line with my most recent projections. However, the significant deceleration in Q2 compared to Q1 makes the second-half bleak, particularly for Porsche and Audi.
To meet the management’s growth guidance of 1.5% (at the midpoint), Volkswagen would need to see significant improvement in the second half (addition of around 540,000 units over the first half deliveries). I think the possibility of this happening is minimal.
Therefore, I have slightly adjusted my deliveries estimates for 2024 and 2025 to reflect my reduced confidence over Audi’s and Porsche’s ability to compensate for weak sales in the first-half as follows;
I just realized that starting from July no Porsche Macan combustion engine car could be sold in the EU as @Aron reported in December last year.
This appears to be significant to me because the Macan was together with the Cayenne Porsches best selling vehicle with 87,000 sales worldwide and I doubt that the new Macan EV can fully compensate all sales in the EU.
In addition the 718 Porsche with 20k sales is likely also going to be affected and its electric versions will only come out in 2025.
@Aron Can you try to find out if more cars are affected + update the model once you will be back?
The models that will be impacted by the EU Cybersecurity law include the ones you mentioned as well as the Volkswagen Up compact car, the Transporter T6.1 and Audi TT and R8 sports cars.
In 2023, 23,458 and 35,841 units of the Macans and Volkswagen Ups were registered in Europe, respectively.
In 2023, 9,233 and 1,591 units of the Audi TT and R8 were delivered to customers worldwide, respectively.
A total of 81,535 units of the T6.1 were produced in 2023 while 5,000 units of the 718 were sold in Europe in 2022.
Assessment
The new cybersecurity law will mainly impact the Porsche brand. Given the good reception of the EV Macan, the headwind could be less than 10,000 units in 2024. The hit on the 718 could be less than 3,000 units in 2024.
The production of the Audi TT and R8 was already negligible, so I don’t expect the regulation to have a significant headwind on Audi deliveries.
For Volkswagen Brand Group Core, I expect an headwind of around 50,000 units in 2024 mainly due to the ending of production of the Volkswagen Ups. The T6.1 will be replaced by a new Transporter model in September 2024.
Why do you think the hit on the 718 could be less than 3,000 cars in 2024?
How many cars of the 718 have been sold in the EU last year? (We might find out this numbers via official registration data)
Registrations data only provide deliveries of the brand and not the model.
According to Good Car Bad Car estimates, 5,054 units of the 718 were sold in Europe in 2018. Worldwide deliveries of this model had grown by 13% y/y in 2023. Assuming the same growth rate and a growth rate of 10% in 2024 (worldwide H1 deliveries were up 8%), 2024 Europe deliveries could have come to 6,300. Half of that (deliveries of 718 in Europe ended at the end of H1) would be 3,150 units.
Good Car Bad Car data looks reliable. It indicates that in 2021 Porsche delivered 5,667,4,656 and 640 units of the 718 in Europe, U.S and Canada respectively. Porsche official U.S retail sales of the 718 in 2021 were 4,291 while Canada official sales were 640. China is also another important market for the 718 with more than 6,000 units delivered in 2021. A total of 20,500 units of the 718 were sold in 2021.
I continue to expect deliveries of 8.95 million vehicles in 2024 (excluding Bentley and Lamborghini). This is in line with management’s recent guidance of 9 million vehicles (lowered from 9.24 million).
Volkswagen Group deliveries fell 7.1% y/y to 2.2 million vehicles in Q3
Volkswagen Group deliveries fell 7.1% y/y to 2.2 million vehicles in Q3, driven mostly by Audi (-16.0%), Brand Group Core (-5.2%) and Porsche (-7.2%), Q2 deliveries were down 3.8% y/y to 2.2 million units.
Year to date, deliveries at the group level are down 2.8% y/y to 6.5 million vehicles, hence 2.5 million vehicles in Q4 are needed to hit the 9 million units recently guided by the management.
In Q3, China deliveries slipped 10.2% y/y to 711,500 units, North America deliveries grew 7.4% y/y to 273,800 units while Western Europe deliveries were down 7% y/y to 743,600 units.
Assessment
Other than at the Brand Group Core, deliveries in other brands are in the right trajectory to meeting my estimates. Deliveries at the Brand Group Core got worse in Q3 probably due to growing competition and economic challenges in China. As such, I am lowering my 2024 deliveries estimate at the Brand Group Core by 150,000 units. Here are my updated deliveries projections:
