Volkswagen AG is bracing for a slowdown in sales growth this year, as the automotive industry grapples with decreasing demand for electric vehicles and escalating competition. The German carmaker announced on Friday that it expects to surpass its 2023 revenue of €322 billion by up to 5%, a notable decline from the impressive 15% increase achieved last year.
Following this announcement, Volkswagen's shares took a hit, initially dropping by as much as 7.2% before recovering slightly. This downturn marks a continuation of a 6.7% decline in the stock over the past year, reflecting investor concerns about the challenges ahead for the company.
While car manufacturers have capitalized on pent-up demand amid widespread supply chain disruptions, Volkswagen is now facing economic headwinds that are expected to dampen consumer spending. Market uncertainties, such as high living costs and borrowing expenses, coupled with China's ongoing property market downturn and weak business sentiment, are adding to the hurdles faced by Volkswagen.
Despite these challenges, Volkswagen remains optimistic about its prospects for 2024. Arno Antlitz, the Chief Financial Officer at Volkswagen, expressed confidence in the company's ability to navigate the competitive landscape and economic uncertainties in the year ahead.
To mitigate the impact of slowing growth in electric vehicles and increasing competition, Volkswagen is intensifying its cost-saving efforts. The company is particularly focused on improving margins and catching up with its rivals, such as Stellantis NV. This endeavor has become more pressing with the emergence of cheaper Chinese models, increased competition from other European automakers, and the formidable presence of Tesla Inc. in the market.
As part of its cost-saving initiative, Volkswagen announced a reduction of €10 billion in its five-year spending plan, bringing the total to €170 billion. This decrease reflects a moderation in spending on both traditional combustion engine models and electric vehicles.
In its fourth-quarter financial report, Volkswagen disclosed that its revenue amounted to €87.1 billion, with an operating profit margin of 7%. The adjusted operating profit remained stable at €22.6 billion, factoring in the negative impact of commodity hedging, totaling €3.2 billion.
Additionally, Volkswagen declared an increase in its dividend payout to ordinary and preferred shareholders by €0.30 per share. However, the payout ratio of 28% fell short of the company's previous target of 30%, underscoring Volkswagen's commitment to returning value to its shareholders amidst a challenging business environment.