Volkswagen sticks to EV targets, pricing despite knock to demand

By Nick Carey and Victoria Waldersee

BERLIN (Reuters) -Volkswagen is working to cut costs and sticking with its electric vehicle prices despite reductions at some rivals, as the German automaker aims to rebuild margins after quarterly profits were hit by bad bets on raw material prices.

A programme targeting 10 billion euros ($10.6 billion) in savings at its main passenger cars brand is delayed, but some measures have already been implemented, Chief Financial Officer Arno Antlitz said on Thursday, confirming a Reuters report.

“There will be communication as soon as they are ready. We shouldn’t be worried about a month or two delay,” Antlitz said of the plans.

The company, in the midst of a strategy shift to slash fixed costs and improve productivity, confirmed preliminary third-quarter results released on Friday that cut its profit margin guidance for this year, disappointing investors.

“We cannot be satisfied with our profitability, which dragged behind our ambitious targets in the third quarter,” Antlitz said in a statement.

The carmaker’s planning round, where it sets budgets for five-year spending, will conclude in mid-November but Antlitz said the company would no longer communicate results directly afterwards, instead updating shareholders at the company’s annual news conference in March.

EV DEMAND

Volkswagen (ETR:) joined a chorus of carmakers and analysts warning in recent days that demand for electric vehicles (EV) is not developing as expected, with the German group’s own order intake for EVs down to 150,000 in Europe from 300,000 last year.

Still, orders increased slowly in the third quarter from the first half and should rise further in coming months, Antlitz said, adding the company was sticking to its targets.

In China, where Volkswagen has enjoyed a market-leading position in the combustion engine era but is now competing against a swathe of local producers, it may lose battery EV market share in the next year or two until the two models it is producing with China’s Xpeng (NYSE:) come to market, he added.

High interest rates are derailing the shift to EVs across the globe, underscored on Wednesday by the scrapping of a GM-Honda partnership and a warning from battery maker LG Energy Solution.

Subdued demand has prompted some EV makers, including Tesla (NASDAQ:), to cut prices.

Volkswagen on Thursday confirmed it made 78.8 billion euros in third-quarter sales, with operating profit rising 14% to 4.9 billion euros.

The company said it still expected to deliver between 9 million and 9.5 million vehicles to customers this year, and for group sales revenue to be 10% to 15% higher than in 2022.

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