Volkswagen the leading car manufacturer in Europe predicts flat operating profit margins by 2025 while fighting through EV transition challenges along with cost-cutting requirements and rising trade conflicts. The company operates in China and Germany where major operational changes are in progress to streamline activity while competing against swiftly evolving competitors.
Inside his recent conference call CFO Arno Antlitz shared that Volkswagen expects Chinese earnings to decrease by up to 1 billion euros because they work on new model releases. German cost-cutting programs have generated 1 billion euros in savings which will accumulate until the end of the year.
CEO Oliver Blume explained to stakeholders in North American export markets that potential Trump administration tariffs on Mexican and European imports remain uncertain. The American market expansion efforts of Volkswagen continue despite their current market share commitments. Blume announced a review of Volkswagen’s plans to launch its CUPRA brand in specific U.S. states because the EV market situation needed reevaluation.
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Volkswagen anticipates operating profit margins to fall within a 5.5% to 6.5% band for 2025 although the company reports 5.9% margins in 2024. The company projects continued expenses will include both EV production costs and expenses for combustion engine vehicles and battery cell plant construction. Lower EV sales cause PowerCo to postpone the pace of capacity expansion at its planned battery plant facilities.
Volkswagen utilizes the same approach as European vehicle manufacturers to create budget-friendly EV models against Asian competition yet encounters elevated production expenses. The company implements numerous cost-reduction measures because of this challenge.
The company receives critique for its dependence on German manufacturing operations that cost more and faces risks from trade restrictions targeting Porsche and Audi since both brands do not operate U.S. factories.
Despite these challenges, Volkswagen’s shares rose 1.6%, with analysts noting that the upper range of the margin forecast exceeded expectations. The company has proposed a dividend of 6.36 euros per preference share for 2024, down from 9.06 euros in the previous year. Volkswagen’s five-year investment plan totals 165 billion euros, a reduction of 15 billion euros from the previous cycle. Operating profit for 2024 fell 15% to 19.1 billion euros on revenue of 324 billion euros, aligning with analyst estimates.