Auto industry: Volkswagen profits slump by almost a third

It's getting tight: at just under nine  million units, Group-wide car sales in 2024 were only marginally higher than the 8.552  million VW curry sausages. Despite the slight slump in sales figures, however, profits plummeted dramatically – by almost a third compared to 2024. The Group, which has an above-average number of employees for the industry, explains the most important correlations in the business figures for 2024 published today.

The management of the second-largest car company behind Toyota (with 10.82  million cars) will find these figures less than appetizing; they are the result of the transformation to electric cars and the tough competition from Asia, which often acted faster and more cheaply. For now, there is therefore a threat of further job cuts and the figures published today do not show any improvement. According to them, sales remained almost unchanged, while profits fell by almost a third. The fact that Volkswagen earned 12.4 billion euros, almost 31 percent less than a year earlier, is mainly due to the Chinese market, as well as the closure of the Audi plant in Brussels, which had become unprofitable. In day-to-day business, the operating result fell by a good 15 percent to 19.1 billion euros, with the margin dropping to 5.9 percent after 7.0 percent in the previous year. The manufacturer was able to increase its turnover slightly to 324.7 billion euros. Production fell from 9.4 to around nine million cars.

Nevertheless, this result exceeds the company's own forecast and analysts' expectations. However, the dividend is to be cut by 30 percent to 6.36 euros per preference share, which is more than many had hoped for. However, Volkswagen employees paid according to the collective agreement will receive a special payment of almost 4800[ ]euros for 2024 before the new results also affect their bonuses. In 2026 and 2027, they will only receive the basic amount of just under 1900 euros, which will be paid out in November. Following an austerity compromise between the Group and the workforce, the earnings-related bonus payment in May will be suspended for two years, after which the bonus will gradually increase again until 2031. VW CEO Oliver Blume and his fellow board members want to forgo eleven percent of their remuneration in 2025 and 2026.

“Putting our house in order”

Chief Financial Officer Arno Antlitz does his best to present the Group result as a mild one, speaking of a “challenging environment” and commenting on the figures as a “decent result overall”. VW CEO Oliver Blume prefers to look to the future and believes that the company has “put its house in order” and plans to launch 30 new models with all brands in 2025. For him, 2025 is a turning point, “the year in which the new strength of the Volkswagen Group can be experienced.”

That is brave considering the expensive production, which can no longer be made much leaner, at least in terms of jobs. Volkswagen tried it in 2024 with plant closures and a termination of the collective agreement. Instead of the planned deep cuts, a compromise at the end of the year resulted in a reduction of just 35,000 jobs by 2030 — far too few and too slow, according to external economic experts. Instead of mass redundancies, Volkswagen has given a new job guarantee, excluding redundancies for operational reasons.

Investments now to be scaled back again

The Group is now planning to reduce its investments again, step by step, including in the combustion engine. This was announced by CFO Arno Antlitz. From 2025 to 2029, the company plans to spend around 165 billion euros on new plants, technology and software development, while around 180 billion euros were still expected for these areas in the previous five-year period from 2024 to 2028. Instead, “synergies within the Group and within the brand groups are to be exploited even more consistently”, said Antlitz.

Despite the announced cutbacks in the area of conventional drives, Volkswagen wants to continue to be able to offer its customers the various drive types. Volkswagen intends to achieve greater flexibility “by further adapting the ramp-up of our battery division to the market environment”, as Antlitz explained. This follows the experience that Volkswagen had to make after it had reserved a lot of money for its battery cell plants, but electric car sales grew much more slowly than expected.

The Group's own software company Cariad also worked much slower than expected and delivered with such long delays that models announced by Audi and Porsche were sometimes years late – and then launched on the market – which were already outdated. The partnership with the US electric car brand Rivian is now intended to speed up software and networking, and also help make them cheaper. The Cariad division, on the other hand, does not have a good forecast for now, with its operating loss stagnating at the familiar level of 2.4 billion euros in 2024.

Volkswagen expects market conditions to remain difficult and margins to decline in the important Chinese market. Trade restrictions and the consequences of geopolitical tensions are creating further uncertainty, as are possible US tariffs on imports. The Group has not priced in the latter in its forecast.

(fpi)