The price increases affects models sold only in Germany for now.
I think what the labor union president is referring to is prices of electric vehicles because I couldn’t find reports saying there have been recent price discounts on combustion vehicles.
The price increase could be temporary. Maybe the company is trying to boost its profitability before the CO2 regulation takes effect next year. I think 2025 will see significant pricing discounts as automakers attempt to sell more EVs to beat their CO2 targets.
I don’t think the price increase today will impact the valuation model by much given that we are already in Q3. The price increase could also compensate declining EV prices. Additionally, the price increase is negligible for most models with the most deliveries such as Golf, Passat, and Tiguan.
I=3 Volkswagen Financial Services transfers its major roles in U.S to Wells Fargo
Beginning on April next year, Volkswagen will transfer U.S. auto loans processing and management to Wells Fargo from Volkswagen Financial Services (VFS), Automotive News reported citing an individual familiar with the matter.
VFS will retain roles such as marketing, referring borrowers to Wells Fargo and dealership management and maintenance.
The partnership is expected to result in job cuts.
At the end of 2023, VFS had 15,439 employees worldwide, 7,311 based in Germany alone.
An audit of Xinjiang plant forced labor allegations did not meet international standards, the Financial Times reported citing Judy Gearhart, a professor who helped developed the SA8000 international standard rules.
Following the Volkswagen audit, MSCI had removed the “red flag” which had barred ESG-focused investors from taking a stake in Volkswagen.
I=6 Mercedes-Benz lowered its 2024 guidance in the main cars unit
Mercedes-Benz lowered its adjusted return on sales target in the main cars unit to a range of 7.5% to 8.5% from 11% originally due to continued sluggish sales in China, dynamic pricing and other valuation adjustments .
Mercedes said the slump in China demand is now affecting the Top-End segment.
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.
I=5 Stellantis becomes the latest automaker to reduce guidance for 2024
Stellantis lowers its 2024 adjusted operating margin outlook to a range of 5.5% to 7.0% from “double digit” growth.
The company said nearly two-thirds of the reduced guidance is due to reduction in production levels in the United States while the rest is a result of deterioration in global sales performance.
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Traton sees its return on sales increasing to 9%-11% by 2029 from the current 8%-10% and expects its revenue to grow by 20%-40% over the next five years.
I=6 Volkswagen is one of the automakers that could be heavily impacted by Dockworkers strike
According to analysts, Volkswagen is one of the automakers most at risk from dockworkers strike.
John Bozzella, CEO of the Alliance for Automotive Innovation pointed out that the affected ports handled 34% of all U.S. motor vehicle and parts trade worth $135.7 billion in 2023.
Volkswagen said it’s monitoring the situation closely.
Since the strike had been expected for a while, automakers are expected to have build up some inventories.
I=5 Volkswagen to bring eight new affordable EVs by 2027 in an attempt to regain market share
Volkswagen brand boss Thomas Schäfer said they will bring eight new affordable electric models by 2027 in order to regain market share.
“The cars will look great and have what it takes to really shake up the market in terms of technology. But: To achieve this in an extremely tough market environment, we have to produce our vehicles profitably and bring them onto the road at affordable prices,” Schäfer said.
Schäfer pointed out that they are now aiming to develop ID.2 in 36 months instead of 50 months.
He added that they are also aiming to reduce per man-hour development costs by 40%.
I=3
Daniela Cavallo, head of the works council said Volkswagen has still not presented the brand’s future plan.
“The Board of Management has still not presented a coherent overall concept for how it intends to strategically lead Volkswagen into the future with the right products, processes and plans,” Cavallo said. “Instead, it continues to focus solely on issues such as labour and factory costs.”
I=6 Audi increases the price of ICEs by an average of 1.9% while reducing the price of EVs in preparation for EU CO2 targets
Effective from December 10, prices of Audi combustion vehicles (A1, A6, A7, A8, Q2, Q3, Q7 and Q8) will increase by an average of 1.9%, Automobilwoche reported.
On the other hand, prices of Audi EVs will still the same and are even being discounted.
A 7% discount is currently being offered on the Q4 e-tron, Q8 e-tron and e-tron GT while a 4% discount is being given to the new Audi Q6 e-tron.
Volkswagen already reduced the price of ID.3 by 3,600 euros and offered a promotional discount of 3,570 euros, taking its price to 29,760 from 36,900 euros.
The strategy is seen as a way to drive up EV sales as EU CO2 targets approaches while maintaining profitability.
I=6 Volkswagen wants to revert to indirect sales for BEVs due to declining sales
Volkswagen Group wants to revert to indirect sales of its BEVs to private customers over the short-term to medium-term due to declining sales.
Volkswagen passenger cars has been using the agency model since 2020 while Audi started this year. Volkswagen Commercial Vehicles and Skoda postponed the start of the agency model few weeks ago.
Volkswagen said CUPRA, the forerunner of the Group, will continue using the agency model.
Volkswagen’s agency model ensures that the price paid by customers is the same and that dealers get the same commission rate.
“The Full Agency with direct sales to customers clearly remains our guiding star in the long-term. However, given changing framework conditions we have to re-evaluate if our current Agency model for all-electric vehicles delivers the best possible customer experience. Therefore, we will initiate a joint review process with our wholesale and retail organizations whether returning to an indirect sales model might be a favorable alternative in the short- to mid-term for selected markets,” said Marco Schubert, Volkswagen Group head of sales. “Results of this process are expected around the end of Q1 2025.”
Assessment
By reverting to indirect sales, dealers will be able to sell the BEVs at any price as long as it’s accepted by the customer. For instance, they could sell at a lower price to one group of customers and at a higher price to another group. This will probably lead to more sales since disposable income among consumers isn’t the same. Customer experience is also likely to improve due to direct interactions with the dealers. However, the shift will likely increase the commission fee since the whole sales process is now transferred to the dealer. As a result, the net price of BEVs will likely be lower than when the agency model was used.
Scout wants to employ a 100% online direct sales model in the US.
They expect the model to help them have control over customer data for targeting purposes, simplify purchasing process for customers and eliminate instances where customers are overcharged.