Volkswagen, the largest European car manufacturer, has officially revised its financial forecasts for the year. Instead of the expected growth between 0% and 3%, the company now anticipates a revenue decline of up to 3%. The revision comes following serious difficulties in the Chinese market, which remains critical for the group.
Market Decline and Investor Panic
Data shows that the group's deliveries in China fell by 37% in the quarter ending in June. This is a direct result of the aggressive entry of local players such as BYD and Geely, who dominate the electric vehicle (EV) segment. The reaction on the Frankfurt stock exchange was immediate – Volkswagen shares fell by 3.2%, increasing their annual decline to 31%.
Structural Problems and Costs
CEO Oliver Blume is facing a massive and difficult restructuring. According to CFO Arno Antlitz, the company suffers from high operating costs, which are 30% higher compared to competitors. To achieve stability, Volkswagen must reduce its costs by at least 10 billion euros and optimize the operation of its plants, which are currently operating below capacity.
Survival Strategy
To regain market share, the group is betting on two fronts:
- Local Partnerships in China: Collaboration with Xpeng for new models and the development of a China-specific platform through Audi and SAIC Motor.
- New Models: New compact electric models (around the ID. Polo series) are expected to support demand during the second half of the year.
Despite the difficulties, management is maintaining the operating margin forecast between 4% and 5.5%, relying on productivity enhancement measures and new market launches.