Volkswagen Lowers Guidance Amid Global Automotive Slump

Volkswagen Group has reduced its forecasts for vehicle deliveries and profit margins for the year, reflecting a decline in global sales. This news may impact investor sentiment as the company navigates a challenging automotive market.

Date: 29-09-2024

AI Rating: 4

Volkswagen Group has announced a revised guidance that indicates a downward trend in vehicle deliveries and sales value, which are concerning signs for investors. The company now aims to deliver nine million vehicles, a decrease of 3% compared to the previous year. The expected value of sales has also dropped by 0.7% to €320 billion (US$356.7 billion), contradicting earlier forecasts for a 5% increase in sales for 2024.

Furthermore, Volkswagen has reduced its profit margin expectations from a range of 6.5% to 7% down to 5.6%. This significant cut, the second adjustment in less than three months, signals deepening issues within the company and the automotive sector as a whole.

The current global automotive slump is not isolated to Volkswagen, as competitors like Tesla and Toyota are also adjusting their forecasts due to weakened demand, particularly in China. Such declines not only affect earnings but could also lead to broader implications for market sentiment regarding the automotive industry.

Volkswagen's entry into contract negotiations with IG Metall and potential facility closures further complicate its already challenging situation, suggesting a concerted effort to cut costs by €10 billion (US$11 billion).

Despite these challenges, Volkswagen's stock does have a consensus rating of Moderate Buy among analysts, indicating some level of confidence among investors. Analysts see a potential upside, with a target price of €141.58 (US$158.05), suggesting a 45.39% increase from current market levels. However, these projections may now be at risk in light of the recent guidance cuts.

Overall, Volkswagen's lowered guidance and the broader automotive slump may lead to more cautious investor behavior and could negatively impact stock prices in the near term.

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