Volkswagen pares sales outlook and seeks 'fresh start' with EV deal

The carmaker said it will aim to improve its cash flow in the second half as it hikes prices and cuts costs, even after it lowered its 2023 outlook for deliveries.

Unlike its peers, Volkswagen is in the midst of restructuring as it’s falling behind in its most important market. Picture: AP/Jens Meyer

Volkswagen is the odd carmaker out in what’s otherwise been an upbeat earnings season for the industry.

While Mercedes-Benz raised its guidance and both Stellantis and Renault posted better-than-expected margins, Volkswagen lowered its car sales outlook and pledged to work on its dwindling cash flow as it struggles with logistics costs and waning orders in China. The shares fell as much as 4.1% in Frankfurt.

Unlike its peers, Volkswagen is in the midst of restructuring as it’s falling behind in its most important market. After having dominated car sales in the country for decades, the Germans are now losing out to Tesla and local champion BYD, who have raced ahead on electric vehicles because they’re better at producing models with technology and software geared to local tastes.

CEO Oliver Blume is trying to turn the tide with a $700m (€628m) investment in Chinese carmaker Xpeng and a plan to jointly develop EVs to bolster VW’s line-up in the world’s largest auto market. But the benefits of that partnership, announced on Wednesday, will take time to materialise — a first joint model won’t arrive until 2026.

“Volkswagen has partially admitted defeat” on EVs in China, Deutsche Bank analysts led by Tim Rokossa said in a note to clients. The Xpeng deal “could be a real chance for a fresh start.” 

Mr Blume is pushing to make Europe’s biggest carmaker leaner with several cost-cutting programs in a value-over-volume strategy. He has replaced top management, pared back the company’s software ambitions and is doling out more autonomy to brands like Audi and Skoda.

The manufacturer cited issues including a transport bottleneck in Europe and North America, with shortages of trains as well as trucks and their drivers, CFO Arno Antlitz said on a call with analysts. Porsche on Wednesday warned that parts shortages that dented output of its only fully electric vehicle may stick around in the second half.

Volkswagen said it will aim to improve its cash flow in the second half as it hikes prices and cuts costs, even after it lowered its 2023 outlook for deliveries.

The carmaker said it now expects to deliver between 9 million and 9.5 million vehicles this year, versus an earlier target of about 9.5 million, citing uncertain economic times.

Its financial targets for 2023 remained unchanged, the carmaker added, indicating it would compensate for lower deliveries with higher pricing and efficiency gains in production. Supply of key components such as semiconductors had improved but transport and logistics delays weighed on the first half, Volkswagen said.

Still, it expected significantly shorter waiting times in the second half and said demand was stable with order books full at 1.65 million vehicles. Worldwide, the Volkswagen Group delivered 2.3 million vehicles in the period from April to June, 18% more than in the same period last year.

- Reporting by Bloomberg and Reuters