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Volkswagen Group Core Maintains Sales But Profitability Hit By Costs In First Half Of 2024
The Brand Group Core made strides with its performance programmes in early 2024. Despite ongoing cost-cutting efforts, further reductions in fixed costs are necessary to navigate the challenging market. The Volkswagen brand's key figures reflect this struggle: fixed costs rose in the first half of the year, and vehicle sales or revenue couldn't offset these increases.
Patrik Andreas Mayer, Member of the Board of Management of the Volkswagen Brand responsible for Finance, stated, "The figures for the Volkswagen brand show very clearly that, even taking the special items into account, our efforts so far to reduce costs are not sufficient. High fixed costs and one-off effects are significantly impacting profitability."
Volkswagen AG's provisions for termination agreements also impacted earnings. Without special items, an operating margin of 6.0% would have been achieved for the Brand Group Core. However, satisfaction with this performance is unwarranted as electric vehicles with lower margins will increase in share.
Thomas Schäfer, Member of the Board of Management of Volkswagen AG and Head of the Brand Group Core & CEO of Volkswagen Passenger Cars brand, emphasized, "It is vital that we continue to do all we can to execute our performance programmes – and above all to systematically tap into the synergies between the brands in the Brand Group Core."
Unit sales in H1 2024 slightly increased to 2.49 million vehicles from 2.45 million in H1 2023, a growth of 1.8%. SEAT/CUPRA and Volkswagen Commercial Vehicles showed strong volume growth. Sales revenue for Brand Group Core was stable at €69.1 billion compared to €68.8 billion in H1 2023.
The operating profit for Brand Group Core dropped by 8.2% to €3.5 billion from €3.8 billion in H1 2023 due to higher personnel expenses from collective agreement pay increases and provisions for termination agreements at Volkswagen AG.
Impact on Operating Return and Cash Flow
The return on sales for Brand Group Core was 5.0% in H1 2024 compared to 5.5% in H1 2023. Adjusting for termination agreement provisions, the operating return was higher at 6.0%. Net cash flow decreased by 21.6% to €2 billion due to higher inventories from new model launches and increased receivables.
The outlook remains cautious amid a weak economic environment, intense competition, and political challenges. The Brand Group Core aims to boost profitability through strict cost efficiency and synergy realisation among brands.
Future Prospects and Strategic Focus
The launch of new models like Tiguan, Golf, T-Cross, and all-electric ID.7 Tourer marked significant milestones in H1 2024 but affected earnings initially. The Brand Group Core expects positive momentum as these models gain market presence.
The goal remains an operating return of 8% by 2026 through strict execution of performance programmes aimed at reducing costs and boosting productivity while leveraging synergies.
Brand Performance Overview
{TABLE_1}The table above summarises key figures for brands within the Brand Group Core during H1 2024 compared to H1 2023.
The Volkswagen Group is a leading global car maker headquartered in Wolfsburg, Germany with operations worldwide including Europe, Americas, Asia, and Africa employing around 684,000 people globally.
In 2023, Volkswagen delivered 9.2 million vehicles globally with sales revenue reaching EUR 322.3 billion and an operating result before special items amounting to EUR 22.6 billion.
The Brand Group Core employs about 200,000 people across sister brands like Volkswagen, Škoda, SEAT/CUPRA and VW Commercial Vehicles working together at various plants to harness synergy potential through standardised processes.
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