Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Volkswagen has lowered its annual guidance for the second time in three months as Europe’s largest carmaker blamed “a challenging market environment” for weaker sales.
The German group on Friday said it expected an operating profit margin of about 5.6 per cent in 2024, instead of a range of 6.5 per cent to 7 per cent it had forecast. The downgrade came after VW lowered its target in July, citing costs to shut down an Audi plant in Belgium.
VW has said it is considering plant closures in Germany for the first time in its 87-year history as the carmaker has grappled with a decline in vehicle demand in Europe and the rise of cheaper Chinese brands.
“A deterioration in the macroeconomic environment is having a negative impact, which could result in further risks,” VW said.
On Wednesday, VW launched negotiations over pay with the IG Metall union, which is demanding a 7 per cent wage rise for employees. The union and the group’s works council have warned strikes will be possible at German factories from December.
Jefferies analyst Philippe Houchois said Volkswagen could be considering shutting two or three facilities, resulting in the reduction of 15,000 jobs. “I don’t think there is a plan B because there needs to be a capacity reduction,” he said.
Porsche SE, the investment vehicle controlled by the Porsche-Piëch family which owns 53.3 per cent of VW, now expects after-tax profits of €2.4bn to €4.4bn instead of its previous range of €3.5bn to €5.5bn.
A slowdown in the sales growth of electric cars has hit the global automotive industry, but the fallout has been particularly large for the groups in Germany where subsidies for buying the battery-powered vehicles were withdrawn late last year.
New registrations for electric vehicles in the EU plunged 44 per cent in August compared with a year earlier with Germany suffering a 69 per cent drop, according to latest figures released by Acea, the European car industry body. In light of the sharp decline, Berlin is discussing new tax incentives to spur consumer demand for EVs.
Last week, Mercedes-Benz also lowered its full-year profit guidance because of a decline in sales in China, the world’s largest car market, where foreign brands have suffered from a fierce price competition with local rivals.
BMW, the Munich-based maker of premium cars, earlier this month cut its annual outlook as it set aside expected warranty payment costs for faulty brake systems and warned of weak demand in China.
Read the full article here
