I am more certain on the following:
- Europe and U.S competition (70% confidence level): I am confident that Volkswagen can maintain its market share in Europe and U.S over the short-term. I don’t expect any noticeable gain in market share in the two regions in 2024 and 2025.
- Costs at brand group core (75% confidence level): Based on the trends seen in 2023 and Q1 2024, I am more certain that the brand group core would continue reigning in on costs. However, I don’t expect any significant cost tailwinds in 2025 since most of it will likely come in 2024.
- Costs at Audi and Porsche in 2024 (55% and 65% confidence level, respectively): I think it makes sense to project that costs at Audi and Porsche will rise significantly in 2024 due to the model launches. However, my confidence level on Audi’s costs is lower than that of Porsche due to the supply chain issues that Audi V6 and V7 models encountered in the first-half of 2024.
- Pent-up demand (60% confidence level): I agree with @Magaly that there’s little pent-up demand left. Volkswagen’s order backlog in the passenger cars segment was down 16% y/y in 2023.
- China competition: I am 60% confident that Volkswagen will continue losing market share in China until 2026. I don’t currently see any tailwinds that could lead to outperformance in the region.
I am less certain on the following:
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Overall pricing in 2025 (28% confidence level): In 2025, the first cheap EVs are expected to arrive in the market. This would possibly impact pricing for ICEs. Also, pricing projections in 2025 especially in Europe aren’t clear. Additionally, worsening macro conditions could lead to discounts. That said, further research by @Magaly on pricing in 2025 would help. Also, I think it would be good to map out all the cheap EVs (less than 30,000 euros) that will come in 2025 and 2026.
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Overall unit sales in 2025 (30% confidence level): Volkswagen’s unit sales in 2025 could be impacted by a number of factors such as macro, EU CO2 regulation, and the shift to EVs. The EU CO2 regulation is expected to drive up costs of producing light vehicles. Given that Volkswagen is far behind in meeting the 2025 CO2 regulation, costs could increase significantly. Hence the company may choose to phase out the less profitable models leading to a decline in sales.
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Porsche’s unit sales in 2024 (47% confidence level): The main assumption in my Porsche’s unit sales projections in 2024 is that it will likely be affected by the transition from one generation to the next. However, as noted above, Porsche’s upcoming models look great and the headwinds from transition as seen in Q1 and deliveries of Cayenne in 2023 may not repeat itself in the coming quarters leading to higher sale units than projected. My projection also assumes that Porsche could offset its declining sales in China by increasing sales in other regions such as the United States. If it fails to do that (eg by failing to get license for new models in time), the projected unit sales in 2024 could be lower.
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Audi and Porsche pricing in 2024 (40% confidence level): Most upcoming Audi and Porsche facelifts don’t have a confirmed launch date. We only know that they will arrive in 2024. If they arrive at the end of the year, it means that pricing in the first quarters of 2025 could benefit from weak comparison period and that my projected 2024 pricing could be lower.
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2024 pricing at the brand group core (45% confidence level): The increased pricing for brand group core 2024 launches may lead to reduced sales since only few of them have seen significant changes. Given the company is currently chasing value over volume, we can expect limited discounts.
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Industry growth rates (45% confidence level): As mentioned in my other post, the industry growth rates are less certain. I think the estimates are adjusted as data come in. @Magaly will look into correlation between Volkswagen unit sales and industry growth rates.
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Performance at Volkswagen Financial Services (30%): Though I am almost certain that used car prices will decline throughout 2024, I don’t understand the business’s other drivers of revenue. Tailwind could arise from this business since the brand’s guidance for operating result exceeds my projection.