VW Group to cut costs and launch 30 models in 2024

Volkswagen Group is launching a major product push this year to help offset a gloomy economic outlook and growing competition. At the same time, a major efficiency improvement has to cut costs impressively.

On Wednesday, finance chief Arno Antlitz presented the automaker’s 2023 results, saying the “general economic situation remains challenging”. VW Group expects a 3% rise in car sales this year, down sharply from 2023. It said it has “started the new year with a clearly positive trend” compared to last year’s start. “Despite that muted economic outlook and intense competition, we are confident about 2024,” Antlitz added.

Good results in 2023

VW Group’s deliveries to customers rose 12% to 9.24 million vehicles in 2023. Deliveries of battery-electric vehicles by all group brands rose 35% to 771,100. That’s 8,3% of total sales.

The company said the operating return on sales of the Brand Core Group comprising VW passenger cars, VW Commercial Vehicles, Skoda, and Seat/Cupra rose to 5.3% from 3.6% in 2023, an important first step toward its target of 8%.

The margin at the Progressive Brand Group (Audi, Lamborghini, Bentley, Ducati) fell to 9% from 12.3%, and the margin at the Brand Group Sport Luxury (Porsche) remained at the impressive 18.6% level of the previous year.

Overall, the operating margin dropped from 7.9% to 7%, and despite a 15% turnover rise, the Group didn’t achieve a higher profit, stabilizing at €22.3 billion.

Many new vehicles

The VW Group plans to launch 30 new or upgraded models in 2024. “To ensure that we remain successful sustainably, we will focus in 2024 on ramping up new vehicles and reducing costs,” CFO Antlitz promised on Wednesday.

VW is pressured to improve its performance in China, where homegrown champion BYD overtook it as the best-selling automaker last year. The automaker is trying to catch up by overhauling its electric offerings, which have failed to impress local customers. Therefore, it is also partnering with Chinese EV maker Xpeng.

It’s pursuing cheaper batteries and improved automated-driving features and aims to regain market share in China from 2026, according to Antlitz. But while VW is ready to give up market share in China this year and next, North America has the potential to become its biggest growth market in 2024, Antlitz added.

VW Group’s 2024 product push includes the market launches of the all-electric VW ID.7 and ID.7 Tourer midsize models, the all-electric Porsche Macan and Audi Q6 e-tron, the VW Buzz long-wheelbase all-electric van, and additional versions of other EV models.

Upgrades, including new hybrid technology, are also available for the combustion-engined VW Golf, Tiguan, Passat, Skoda Octavia, and Skoda Superb.

Volkswagen Group and Porsche brand CEO Oliver Blume said that early orders of the newly electric Macan have far exceeded expectations, and the numbers for some of its biggest potential markets aren’t even in yet. “We’re overwhelmed by orders coming in for the electric Macan. We’re confident it will be a hit,” he boasted.

The new EV launches come as demand growth for electric cars has been slowing. When asked about the demand for EVs, Blume said, “They are the future, period.” But he immediately added, “We are flexible enough to adapt to changes in different markets.”

Cutting costs

Blume didn’t give details about the profit margin on BEVs, but analysts presume that it’s still far lower than conventional ICE cars. “The Performance program plays a major role in compensating for the initial negative impact of new models,” he said. Blume wants to cut costs through important efficiency measures in his 32 factories worldwide (occupying some 490,000 workforce).

To emphasize that 2024 will also be the year of a major cost-cutting exercise in the Group, Blume announced that the top management will also reduce its base salary by 5%. “It’s important that we signal that we are making an effort, too.”

The VW CEO’s base salary is €1.3 million, so he will voluntarily reduce his wage by €65,000. However, he doesn’t mention that this base salary is only a (small) part of his total remuneration: last year, the VW CEO received an additional €8.7 million in ‘variable compensations’.

Assigning new models

Because of the cost-cutting exercise throughout the whole group, everybody is looking at which new models will be assigned to the different factories. Normally, the final decisions will be made by the end of the year, but most details should be known by the end of the summer.

Audi Brussels is eagerly awaiting the news. At the beginning of this year, it became clear that the Audi factory in the Belgian capital would no longer build the Q8 e-tron successor (from 2027 onward).

Last year, the factory was prepared to also build the smaller Q4 e-tron as an ‘overflow’ from the main MEB platform EV models in Zwickau. However, the demand for some of these models (especially the VW ID. 3 and ID.4) didn’t follow expectations, and Zwickau had more than enough capacity to build all models independently.

Audi Brussels needs the assignment of (a few) electric models soon. Otherwise, the factory that was Audi’s pilot EV plant not so long ago will have no future.