Company Reports

The board has approved ramping up Volkswagen's transformation plan. Total headcount reduction will increase by 50,000 to 120,000; investment spending will be reduced by almost 20%, and the outlook for China has been softened, prompting a stronger export strategy.

Volkswagen has a long history of high capital spending, a stubbornly growing cost base, and net cash outflows. Management touts the firm’s advantages of global scale and strong brands. However, its financial metrics compare unfavorably with peers. Investors seem fatigued. VW’s 75% stake in Porsche and 88% stake in Traton account for more than the entire group’s market capitalization. Its net asset value per share is 5 times its current share price.

VW lowered its full-year revenue and deliveries guidance to account for an increasingly tough Chinese market. However, it maintained its margin guidance, reflecting the effects of its cost-reduction program. Its 2030 plan reflects the somber reality of structural industry changes.

Volkswagen has a long history of high capital spending, a stubbornly growing cost base, and net cash outflows. Management touts the firm’s advantages of global scale and strong brands. However, its financial metrics compare unfavorably with peers. Investors seem fatigued. VW’s 75% stake in Porsche and 88% stake in Traton account for more than the entire group’s market capitalization. Its net asset value per share is 5 times its current share price.

VW has a long history of high capital spending, a stubbornly growing cost base, and net cash outflows. Management touts the firm’s advantages of global scale and strong brands. However, its financial metrics compare unfavorably with peers. Investors seem fatigued. VW’s 75% stake in Porsche and 88% stake in Traton account for almost the entire group’s market capitalization. Its net asset value per share is 4 times its current share price.

Volkswagen reported first-quarter revenue of EUR 76 billion, down 2.4% year over year, reflecting a 3.9% contraction in vehicle deliveries as continued strength in Europe was offset by weakness in China and North America. Operating margin declined 40 basis points to 3.3%, below guidance.

Volkswagen’s group sales fell 4.7% in the fourth quarter, reflecting lower volumes in commercial vehicles, progressive brands, and sports luxury brands. Management targets sequential improvement in operating margin from the 2.8% reported in 2025, but lowered its 2030 margin ambitions.

The European Union has softened its emission-reduction targets for the auto sector and initiated support for electric vehicle demand. By 2035, carmakers need to reduce emissions by 90%, down from the previous 100% target. For vans, the CO2 reduction target has been cut to 40% from 50% by 2030.

Volkswagen reported group sales up 2.3% in the third quarter, on solid volume growth, with an operating loss of EUR 1.3 billion. Excluding the EUR 4.7 billion related to Porsche's goodwill impairment and restructuring costs, the operating profit of 4.2% is comparable with half-year results.

Volkswagen reported improving margins at its core brand segment at the half-year.

VW has a long history of high capital spending, a stubbornly growing cost base, and net cash outflows. Management touts the firm's advantages of global scale and strong brands. However, its financial metrics compare unfavorably with peers. Investors seem fatigued. VW’s 75% share in Porsche and 88% share in Traton account for almost the entire group’s market capitalization. Its net asset value per share is almost 4 times its current share price.

The European Union and the US have reached a trade deal, setting the baseline tariff rate at 15% for imports from the EU, including autos.

Revenue declined 3% in the second quarter, and operating profit fell 29% to EUR 3.8 billion or increased 2% to EUR 5.5 billion excluding tariffs (EUR 1.2 billion), restructuring, and diesel costs. The "brand group core" business realized an operating margin of over 8%, excluding adjustments.

Volkswagen reported an improving demand environment, with notable strength in Europe. However, its operating result for first-quarter 2025 came in below the 5.5%-6.5% operating margin range guidance for the full year. No adjustments to the outlook have been made for the effects of tariffs.

Despite continued uncertainty looming over US import tariffs affecting European automakers, we update our fair value estimate to reflect tariff implications. We also revise our long-term growth assumptions for the European automakers in China.

VW has a long history of high capital spending, stubbornly growing fixed-cost base, and net cash outflows. Management touts the firm's advantages of global scale and strong brands. However, its financial metrics compare unfavorably with peers. Investors seem fatigued. VW’s 75.4% share in Porsche accounts for about 100% of the entire group’s market capitalization alone. Its net asset value per share is more than 4 times its current share price.

On April 2, US President Trump reaffirmed the implementation of a 25% worldwide import tariff on all automobiles and automobile parts imported into the US, with the exceptions related to the United States-Mexico-Canada Agreement, as initially announced on March 26. The automobile industry will not be subject to the reciprocal tariffs announced on April 2. Thus, we reaffirm our estimate of a negative impact of between 20% and 30% on our fair value estimates for no-moat auto original equipment manufacturers resulting from these tariffs. Despite the downward revisions under this scenario, we continue to believe that there is a sufficient margin of safety at current prices, as shares trade at a significant discount to our valuations. BMW and Mercedes export approximately 50% of their US production, which may be affected by retaliatory tariffs, possibly increasing the negative impact on our fair values.

US President Donald Trump announced a blanket 25% tariff on all auto imports, effective April 2, after the March 26 European market close. Thus far, the tariffs are said to be "permanent," apply to imports from all countries equally, and apply to both final vehicle imports as well as parts. Vehicles that meet the United States-Mexico-Canada Agreement trade terms will only have tariffs levied on the non-US parts. These tariffs are stated to be in addition to any other tariff that may come in the future. The share prices of US and Japanese automakers largely traded lower by midsingle digits on the news, and we expect the same from European automakers. As per our March 5 note, we expect a negative 20%-30% impact on our fair value estimates on a permanent tariff of this size. For now though, we leave our valuations unchanged as we assess the likelihood of tariff permanence and the impact of likely reciprocal actions by the European Union. There is enough margin of safety at current prices for investors, as shares trade at deep discounts to our valuations.

No-moat Volkswagen’s 2024 results beat our expectations as well as management’s guidance on the top- and bottom line. In particular, automotive free cash flow of just over EUR 5 billion exceeded management’s guidance at the preclose call of around EUR 2 billion, lifted by a beat on operating profit of around EUR 1 billion. The remainder of the cash flow beat was driven by a strong working capital release, with items that were more one-off in nature. An increase in provisions for the planned restructuring in automotive was offset somewhat by the reversal of personnel-related provisions, following collective bargaining agreements to forgo wage increases as well as a EUR 1 billion increase in provisions related to a miscalculation of time asset fringe benefits. We will review our fair value estimate, currently at EUR 264, following the release.

US President Donald Trump announced a one-month reprieve on March 5, 2025 for automakers from the 25% blanket import duty imposed on goods imported from Mexico and Canada. The delay to automakers, negotiated by Detroit's Big Three—Ford, General Motors, and Stellantis—aims to equalize the playing field among automakers importing vehicles into the US from countries other than Mexico and Canada that are not yet paying tariffs, and to provide time to initiate the process of moving production into the US. Under the scenario where this import duty is made permanent, it will materially affect the financial outlook for most of our European auto original equipment manufacturer coverage. We estimate it will reduce our fair value estimates by between 20% and 30% for no-moat Stellantis, BMW, Mercedes, and Volkswagen. Given the uncertainty around the quantum or duration of tariffs, we maintain our fair value estimates for now.