The Volkswagen Group has just reported its financial results for the past year, and the headline news is that the massive motor-making conglomerate has posted an operating profit of € 22.6 billion.
Clear, strategic focus
Oliver Blume, CEO of Volkswagen Group, said: "With inspiring products and a clear, strategic focus on implementation, we are looking confidently into the year 2024. Volkswagen Group is entering the long-distance race of transformation from a position of strength. At the same time, we are aware of our challenges and are tackling them consistently to leverage the enormous potential of Volkswagen Group. We are now preparing the Group for sustainable positive development. With our broad and constantly growing product portfolio, we can fulfil the wishes of all our customers globally like no other manufacturer. This flexibility is a real competitive advantage that will enable us to remain successful in the future."
Overall, new car deliveries across the Group's brands - including Volkswagen itself, as well as Audi, Skoda, SEAT, Bentley, Cupra, and Lamborghini - rose by 12 per cent to 9.24 million vehicles. Total sales revenue was € 322 billion, leading to an operating profit of € 22.6 billion, which boils down to an after-tax profit of € 17.9 billion.
That means VW Group made a return on sales, averaged across all its brands, of 7.0 per cent, a pretty decent figure in the modern motor industry, and with other issues, including what VW describes as "considerable headwinds from the valuation of commodity derivatives, which had a positive impact on the operating profit in the previous year."
The share of electric cars being sold across the group grew substantially last year, peaking at ten per cent of all sales in the fourth quarter. Overall, for the year, the share was 8.3 per cent electric, totalling 771,100 battery-electric vehicles, an increase of 35 per cent compared to 2022.
Challenging environment
Arno Antlitz, CFO and COO of Volkswagen Group said: "In a challenging environment, Volkswagen Group delivered robust results in 2023. That is what we want to build on this year. The Group is well-positioned and operates from a financially strong position. On this basis, we will consistently drive forward our transformation towards electromobility and digitalisation. To ensure that we remain successful sustainably, we will focus in 2024 on ramping up new vehicles, reducing costs, making greater use of synergies within the Group and establishing more robust regional positioning also by continuing to grow profitably in North America."
All of this means that VW is investing heavily in future models and new technology, and Antlitz confirmed that the plan is to pour € 170 billion of investments into the Group's next five-year plan, running from 2025 to 2029: "This will be invested primarily in new products, strengthening the regions, in the battery business and platforms for battery electric vehicles and in models with modern, increasingly hybridised combustion engines. Investments are expected to peak in 2024 and then approach the target level of 11 per cent of sales revenue by 2027."
In the meantime, VW is still looking to cut its costs. By the end of this year, VW aims to have made savings of € 10 billion across Group operations, which the company says will "Provide cushioning for adverse effects such as inflation and increased costs."
In 2024, VW Group will launch a whole host of key new and updated models, including the Golf, Tiguan, Passat, Octavia, and Superb as updates, the Porsche Macan Electric and the Audi Q6 e-tron on the Premium Platform Electric, the MEB-based ID.7 and ID.7 Tourer, the Cupra Tavascan, and the ID. Buzz with a long wheelbase.
New electric car platform
A key component of the electric expansion will be the introduction of the much-delayed PPE - or Premium Platform Electric - which will make its debut in the Audi Q6 e-tron and the Porsche Macan Electric. According to VW, the "First fruits of the realignment can be seen with the launch of the all-electric premium platform PPE, which stands for performance, flexibility, and scalability. Following the example of the MEB platform, the PPE platform enables the efficient use of synergies in the premium and luxury segments." The Group says that it is planning 30 new model launches this year across all of its brands and that while it presses ahead with plans for more and more electric models, combustion and hybrid cars will still play a part in areas of the world where electrification is slower to get going.
VW divides its various brands into internal groupings, and all of these turned a significant profit in 2023. The Brand Group Core (Volkswagen, Volkswagen Commercial Vehicles, Skoda, SEAT/Cupra) saw sales revenue rise to € 137 billion, while the Brand Group Progressive (Audi, Lamborghini, Bentley, Ducati) grew sales to €69.9 billion. Porsche, which gets a special slot in the Group all to itself, brought in sales of €37.3 billion on its own, with a profit margin of 18.6 per cent.
Financial services contributed € 3.8 billion to the operating profit, but that's less than it managed in 2022. According to VW, this is because of the expected normalisation of used car prices. In 2021 and 2022, the residual values of used cars rose to unprecedented levels due to the semiconductor-related shortages of new vehicles. The group recognised early on that this level would not be sustainable and planned accordingly."
Meanwhile, Brand Group Trucks (TRATON: MAN, Scania, Navistar, Volkswagen Truck & Bus) increased sales to € 45.7 billion, while the Cariad software division saw sales rise to € 1.1 billion. Only VW's battery-making division lost money, but that's mostly due to its massive up-front investment in gigafactories here in Europe and in Canada.
On the emissions front, the company says that it is aiming to achieve balance sheet carbon neutrality at all production sites worldwide by 2040 - ten years earlier than originally planned. The aim is to reduce 90 per cent of all greenhouse gas emissions compared to 2018. The Group intends to achieve this by converting its energy supply and increasing energy efficiency, among other measures. For example, by 2030, 100 per cent of the external electricity supply at all locations, including China, will come from CO2-neutral sources. All European locations are already supplied with 100 per cent green electricity. Eight plants in Europe already operate on what VW calls a "balance sheet carbon-neutral basis."