Today, Volkswagen ($VOW (+1%) ) also held its investor and analyst conference today. I would like to summarize an insight from the meeting for you.
Oliver Blume looked back on a year 2024 that was characterized by strategic decisions in a rapidly changing environment. Despite weak demand in Europe, rising trade barriers, challenging industrial conditions in Germany and strong price competition in China, the Volkswagen Group the Volkswagen Group was not discouraged. On the contrary, it has pursued a determined course and pushed ahead with the transformation along the TOP 10 program.
One important point was the comprehensive model offensive with over 30 new models from Volkswagen, Skoda, Cupra, Audi and Porsche. The design was sharpened, the brand identities emphasized and the quality of products and services measurably improved. quality of products and services was measurably improvedwhich was reflected in the positive feedback from customers and the trade press.
In China a new strategy has been implemented, which relies on strong regional technology partners (such as Xiaopeng), an innovation center in Hefei, accelerated development times, revised cost structures and a product strategy tailored to Chinese customers. Blume emphasized that, unlike many other manufacturers in China, Volkswagen continues to be profitable which makes it possible to invest in new models and technologies.
North America remains a key market for the Group's growth strategy. Investments and strategic partnerships are intended to drive growth in new market segments. The revitalization of the Scout brand for pickups and robust SUVs with flexible drive options met with great interest, with almost 80,000 pre-orders already received.
In the area of software important milestones were also reached. Software activities were realigned and the team strengthened with new partners: Xiaopeng for China and Rivian for other regions are to develop the electronic architectures and software solutions of the future. CARIAD will focus on the further development of central digital services, autonomous driving, infotainment, cloud services and data processing. Responsibility and control over the software will lie more strongly with the brands.
Another important success was the future package for Volkswagenwhich forms the basis for an economically successful future for the German sites. The key points are the reduction of overcapacities in Germany, the reduction of labor costs, the increase in productivity and competitive plant costs.
Despite these challenges and restructuring measures, the Group was able to generate Group sales of almost 325 billion euros and an operating result of 19.5 billion euros. were achieved. Blume emphasized the resilience and the will to shape of the company. Based on these results, a dividend of Annual General Meeting a dividend of 6.36 euros per preference share which corresponds to a payout ratio of 30% of net profit.
Arno Antlitz presented the financial details for 2024 and the outlook for 2025. vehicle sales amounted to 9 million units, a decrease of 3% compared to the previous year. The turnover increased slightly by 1% to around 325 billion euros. The operating result fell by 15 % to 19.1 billion euros, which corresponds to an operating margin of 5.9%. corresponds to an operating margin of 5.9 %. The result was burdened by costs for new products, increased fixed costs and restructuring expenses of around 3 billion euros.
The net cash flow in the Automotive Division exceeded expectations and amounted to 5 billion euros. The net liquidity remained at a solid level of 36.1 billion euros.
For the year 2025 Antlitz expects a significant tailwind from the renewed model portfolio and a slightly positive volume trend outside China. The implementation of the future package for Volkswagen and continued cost discipline should have a positive impact. However, the expansion of BEV volumesvolumes, particularly in Europe, as well as start-up costs for new models and battery activities will have a negative impact on earnings. Overall, a sales growth of up to 5 % is expected, with an operating return on sales of between 5.5% and 6.5with the first quarter expected to be lower-margin. The investment ratio in the automotive sector should be between 12% and 13%, and the net cash flow is expected to be in the range of EUR 2 to 5 billion. This outlook does not take into account the potential impact of customs duties, changes in CO2 regulations or further restructuring measures.
In the subsequent Q&A, the analysts asked various questions, which I would like to summarize thematically here:
Strategy and execution: Tim Rokossa from Deutsche Bank asked whether execution was now the main priority after products, partners and costs. Oliver Blume emphasized that after 2.5 challenging years and extensive restructuring, the focus is now on accelerating the implementation is now the focus. The programs are on schedule and in many cases faster than expected.
Cash flow and margins: Rokossa asked about free cash flow and the stronger start to the year. Arno Antlitz explained that the 2025 free cash flow will be reduced by restructuring expenses of 2 billion euros and continued high investments. In addition, the lower result of the Chinese joint ventures would have an impact on the dividend and therefore on cash flow. The stronger start to the year is due to a significant increase in the share of BEV which is reducing margins in the short term. Mike Tyndall from HSBC asked about the further burdens the BEV mix that are limiting operating profit growth. Antlitz referred to higher depreciation due to the investments made.
CO2 regulation: George Galliers-Pratt from Goldman Sachs addressed the European CO2 regulation regulation. Oliver Blume was positive about a possible adjustment that could bring more flexibility for 2025. Further discussions on more flexibility are also underway for the 2030 and 2035 targets.
Investments and capital allocation: Patrick Hummel from UBS discussed the reduction of the 5-year investment plan and and possible higher distributions in the future. Arno Antlitz emphasized that the initial focus was on achieving the targets set, in particular the reduction of R&D and investment expenditure to 10% by 2027. A possible increase in the payout ratio could be discussed in one to two years.
China strategy: Several analysts asked about the China strategy. Blume reiterated the "in China, for China" strategy and the successful cooperation with local partners. Antlitz explained that conscious decisions are being made in China between margin and market share and that a further decline in market share is expected in 2025 before the company intends to attack again with new products from 2026.
Software and partnerships: Horst Schneider from Bank of America inquired about the progress of the progress of the software partnerships with Rivian and Xiaopeng. Blume was satisfied with the progress. The first Volkswagen models are to be launched on the market with Xiaopeng in 2026 and work is being carried out jointly on a Volkswagen China platform. Rivian is on schedule, with the first vehicles for winter tests in 2025/2626.
CARIAD and PowerCo: Harald Hendrikse from Bank of America asked about the outlook for outlook for the losses of CARIAD and PowerCo and when they might reach the break-even point. Arno Antlitz promised to provide more detailed information on this at the next event in Frankfurt.
My impression from the analysts' conference is that Volkswagen AG is undergoing a challenging transformation process process, but solid results for 2024 were able to present. The strategic decisions seem to be bearing fruit, even though the challenges in the global market continue to exist. The focus for 2025 is clearly on cost efficiency, the successful launch of new models and strengthening our presence in China and North America.
Overall, the management appeared focused and determinedto achieve the targets set. The coming quarters will show to what extent the ambitious plans can be implemented.
