{"id":7285,"date":"2023-05-11T10:58:09","date_gmt":"2023-05-11T14:58:09","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/volkswagen-2023-profit-target-looks-tough-while-china-electric-challenge-mounts\/"},"modified":"2023-05-11T10:58:09","modified_gmt":"2023-05-11T14:58:09","slug":"volkswagen-2023-profit-target-looks-tough-while-china-electric-challenge-mounts","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=7285","title":{"rendered":"Volkswagen 2023 Profit Target Looks Tough, While China Electric Challenge Mounts"},"content":{"rendered":"
\n

Volkswagen reported strong operating profits in the 1st<\/sup> quarter and expressed hopes earnings will reach the target range for 2023. But a European economy likely to be stagnant at best won\u2019t help, while VW\u2019s flagship electrification project is sputtering as competition led by China will undermine margins.<\/p>\n

Chinese electric car competition will be an accelerating threat to all European carmakers. Chinese competition is expected to gouge \u20ac7 billion a year from their profits by 2030 unless action is taken, according to a report.<\/p>\n

Although VW\u2019s operating profit fell to \u20ac5.7 billion in the 1st<\/sup> quarter from \u20ac8 billion in the same period last year, but after excluding the impact of commodity trading, it rose 35% to \u20ac7.1 billion for a margin of 9.3%. The target for the year remains in the 7.5 to 8.5% range.<\/p>\n

The Financial Times Lex column said VW faces slowing growth, as the likes of Tesla expand.<\/p>\n

\u201cCEO Oliver Blume hopes to boost car sales and avoid a collapse in prices. Neither looks easy,\u201d Lex columnist Neil Unmack said.<\/p>\n

<\/fbs-ad><\/p>\n

\u201cCarmakers like VW are entering a new era, where growth is slow, and competition rising,\u201d Unmack said.<\/p>\n

Investment researcher Bernstein agreed the first quarter performance was impressive, but profit targets were \u201cambitious\u201d.<\/p>\n

\u201cAchieving 2023 margins of 8.0% remains a challenge, given the margin dilution implied by the necessary catch-up in Volume Group and Premium Group volumes, but the CFO did highlight improved raw materials costs helping reduce costs,\u201d Bernstein said in a report.<\/p>\n

Investment bank UBS said the solid performance of VW\u2019s premium (Audi, Porsche) and luxury brands (Bentley, Lamborghini) helped the first quarter\u2019s solid performance, but the workaday subsidiaries like VW\u2019s own brand, Skoda and SEAT will be a drag on results.<\/p>\n

\u201cOur thesis for VW\u2019s mass-market brands hasn\u2019t changed and we still expect oversupply emerging in the course of 2023 with more downward pressure on price and mix as the existing backlog gets executed,\u201d UBS said in a report.<\/p>\n

Next year will bring increasing pressure on profits, UBS said.<\/p>\n

VW\u2019s battery electric vehicles (BEVs) will also come under pressure as competition intensifies. VW led the pack in the early stages of vehicle electrification and has now been joined by other European manufacturers. But it\u2019s the threat from Chinese manufacturers that represents the biggest threat.<\/p>\n

\u201cIntense price competition in BEVs will make it very tough for VW to be profitable with its BEV product range, and this will be combined with a higher and dilutive BEV share in the mix,\u201d UBS said.<\/p>\n

This threat from China will accelerate during the rest of the decade and will seize a big chunk of BEV sales and profits from Europeans, according to a report from Allianz Trade, a subsidiary of German insurance company Allianz.<\/p>\n

Allianz Trade said sales of Chinese BEVs will cost European automakers \u20ac7 billion a year in lost profits by 2030 unless the European Union (EU) takes action. Action should include tariffs. Chinese vehicle imports in Europe are subject to a 10% import duty. The report said other actions should include subsidies to boost European battery production and technology development, while Chinese manufacturers should be persuaded to set up factories in Europe.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Volkswagen reported strong operating profits in the 1st quarter and expressed hopes earnings will reach the target range for 2023. But a European economy likely to be stagnant at best won\u2019t help, while VW\u2019s flagship electrification project is sputtering as competition led by China will undermine margins. Chinese electric car competition will be an accelerating […]<\/p>\n","protected":false},"author":1,"featured_media":7286,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-7285","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\nVolkswagen 2023 Profit Target Looks Tough, While China Electric Challenge Mounts | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Volkswagen reported strong operating profits in the 1st quarter and expressed hopes earnings will reach the target range for 2023. 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