Volkswagen has revised its annual outlook for the second time in under three months, citing weaker-than-expected performance in its passenger car division amid mounting challenges in the automotive market. Europe’s largest carmaker now expects a profit margin of around 5.6% for 2024, down from the previously forecasted 6.5-7%, and below the market estimate of 6.5%.
The revised outlook follows similar downgrades from other German automakers, including Mercedes-Benz and BMW, who have also been grappling with a slowdown in demand, particularly in China—the world’s largest automotive market. Additionally, Volkswagen’s forecast for global deliveries has been reduced to around 9 million vehicles, down from an earlier projection of a 3% increase from last year’s 9.24 million units.
This adjustment comes shortly after Volkswagen initiated key negotiations with IG Metall, Germany’s most influential labor union, regarding wages and job security. These talks could result in historic factory closures in the country if unresolved, adding more pressure to the already beleaguered auto giant.
Volkswagen attributed the lower forecast to a “challenging market environment” and underperformance across its Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, and Tech. Components divisions. The company’s sales are now expected to decline by 0.7% to €320 billion, down from an initial expectation of a 5% increase.
Shares in Volkswagen and Porsche fell by 0.7% and 1.6%, respectively, following the announcement. Along with high energy costs and cheaper competition from Asian manufacturers, the downturn in demand has intensified the pressure on Germany’s export-reliant economy, already facing a skilled labor shortage.
The situation also underscores growing global concerns about the automotive industry’s future, with U.S. presidential candidates highlighting the impact of China’s growing dominance in auto production.
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