Automotive News Europe — 2024-04-22
Automotive Industry
VW said it will take until 2026 to start winning back market share in China.
Volkswagen Group faces an uphill battle to convince investors it can turn around its business in China.
After being overtaken by China’s BYD as the nation’s top automaker, VW said it will take until 2026 to start winning back market share.
That prognosis is casting a shadow over a string of key meetings this week, including investor presentations in Beijing.
“We doubt that Volkswagen can convince the market that the negative trend can be halted or reversed,” said UBS analyst Patrick Hummel.
VW has failed to shake negative investor sentiment since model delays and software missteps prompted the company to replace then-CEO Herbert Diess with Porsche head Oliver Blume in 2022.
Under Blume, the automaker has put in place new partnerships in China, teaming up with local EV maker XPeng for its EV models, and started a deep overhaul to lift returns at its struggling VW brand.
Investors will be looking to Blume for fresh optimism this week (thirs week of April 2024) at VW’s upcoming Capital Markets Day on 24 April 2024, dubbed China Day, followed by the auto show in Beijing.
Up to now, they have not been convinced. VW’s stock has fallen about 13% since Blume took over, while the share price of rival Stellantis, which has been quicker to introduce more affordable EV models, has nearly doubled over the same period.
VW is not alone in struggling with the rise of China’s domestic auto industry. German automakers BMW and Mercedes-Benz have seen their market share decline, particularly among electric models, as companies like BYD and Nio pulled ahead with competitive prices and models filled with the latest tech gadgetry.
But VW’s struggles stand out. Profitability at its joint ventures in China has been declining since 2015 and is now roughly half of what it was then, according to an analysis from Bernstein. After reporting €2.6 bn ($2.8 bn) in operating profit in 2023, VW expects as little as €1.5 bn from those businesses in 2024.
“Time might be running short for Volkswagen,” said Pal Skirta, an analyst at B Metzler Seel Sohn & Co. “The lack of affordable EVs in comparison to Chinese, but also already to some other European volume brands, might weigh on the valuation of the group in the quarters ahead.”
Bank of America’s Horst Schneider sees potential for VW to raise its guidance after the second quarter after issuing a conservative forecast.
Moritz Kronenberger, a portfolio manager at Union Investment Privatfonds, agreed with the potential for VW to raise its guidance, but cautioned that the outlook is still uncertain.
“It’s us, the buy side, who are losing the money once Volkswagen starts to come up with disappointing results again,” Kronenberger said.