Volkswagen lowers its 2024 forecast in light of the challenging market situation
- Volkswagen said it now expects revenue to decline by around 0.7% to 320 billion euros in 2024 (previous forecast: growth of 5% y/y) and operating return on sales to come in at around 5.6% (previous forecast: lower range of 6.5% to 7.0%).
- It now expects 2024 deliveries to come in at around 9 million vehicles down from 9.24 million vehicles (or +3% y/y) originally forecasted.
- Volkswagen said the updated outlook is due to challenging market environments and developments that have fallen short of expectations especially at Volkswagen Passenger Cars, Volkswagen Commercial Vehicles and Tech. Components.
- It pointed out that due to challenging environment outside of Europe, Volkswagen Financial Services no longer expects to recoup the 0.2 billion euros related to the deconsolidation of Volkswagen Bank Rus in the course of the year and is, therefore, lowering its operating result guidance to 3.2 billion euros from around 4 billion euros.
- Volkswagen Group now expect Automotive Division net cash flow of around 2 billion euros (previously: 2.5 to 4.5 billion euros) and net liquidity in the range of 36 to 37 billion euros (previously: 37 to 39 billion euros).
Assessment
The stock was little changed after the press release, probably because the market expected such an update after Mercedes-Benz and BMW lowered their forecasts. Analysts such as Henning Cosman of Barclays recently said they cut their forecasts for Volkswagen due to profit warnings from BMW and Mercedes-Benz.
The new management’s revenue guidance is lower than our forecast of EUR 326 billion (or +1.25%). Similarly, the new management’s operating return on sales guidance is significantly lower than our forecast of 6.28%. However, the guided deliveries number is slightly above our forecast of 8.95 million, indicating that the reduced revenue guidance may be largely due to tough pricing environment @Magaly.
Volkswagen Financial Services is another business division that we may have to examine in detail. It may be facing a tough time in United States given it recently transferred most of its operating activities to Wells Fargo.