Volkswagen AG has revised its guidance downward for the second time this year, citing weakening demand that will affect the company’s profitability. This comes as Volkswagen faces challenges such as potential job cuts and unprecedented plant closures amidst negotiations with unions.
The company announced on Friday that it now anticipates an operating margin of 5.6%, a decrease from its previous forecast of up to 7% in July which was already lowered due to expected costs related to closing an Audi plant in Belgium. Additionally, the net cash flow in the automotive division is expected to be less than half of what was initially projected.
All three major German carmakers – Volkswagen, Mercedes-Benz Group AG, and BMW AG – have issued profit warnings this month as they struggle with sluggish sales in China and increased competition in the electric vehicle market. Volkswagen’s CEO Oliver Blume has highlighted high costs in Germany and the company is considering plant closures for the first time in its history in an effort to enhance competitiveness.
Volkswagen’s global deliveries are expected to decrease to around 9 million units this year, down from 9.24 million in 2023. The company also mentioned that its passenger-car brand and commercial vehicles unit are underperforming and cited risks for its high-volume carmaking group.
Earlier in the month, BMW and Mercedes-Benz also lowered their earnings forecasts due to various challenges including recalls and weakening sales in China. BMW specifically mentioned a fault in the braking system from a supplier resulting in a recall of 1.5 million vehicles.
In summary, Volkswagen’s decreased outlook and challenges in the market indicate a turbulent period for the automotive industry as companies navigate through changing consumer trends and global economic conditions.
