Volkswagen says profits in 2023 hiked, but warns on slow sales growth

FRANKFURT: German auto giant Volkswagen on Wednesday reported a forecast-beating rise in profits for 2023 as vehicle deliveries rebounded but warned of slower sales growth this year, sending its shares down.

The 12-percent increase in deliveries marked a turnaround following three straight years in decline linked to production disruptions caused by shortages of key components. Net profits rose 13.1 percent from the previous year to 17.9 billion euros ($19.6 billion). Sales meanwhile grew more than 15 percent to 322.3 billion euros.

The 10-brand group — which includes Audi, Porsche and Skoda — saw particularly strong sales in Europe and North America.

In China, sales grew modestly but at a slower than in the previous year, offering the latest evidence that Volkswagen is losing ground in its most important market.

Volkswagen has fallen behind domestic competitors in China, losing its title as the best-selling auto brand to BYD.

The auto giant’s outlook for 2024 was also very subdued. It expects vehicle deliveries to advance in 2024, forecasting a modest increase of up to three percent due to tougher international competition and potential supply chain problems.

Sales growth is similarly expected to come in at five percent, well down on 2023.

“The persistently high inflation in major economic regions and the resulting restrictive monetary policy measures taken by central banks are expected to dampen consumer demand,” it warned. “Continuing geopolitical tensions and conflicts are weighing on growth prospects; risks are associated in particular with the Russia-Ukraine conflict and the confrontations in the Middle East.”

Volkswagen shares fell more than 3.5 percent in Frankfurt after the results were released.

Volkswagen also warned there could be decreases in demand “possibly exacerbated by media reports or insufficient communication”.

The carmaker came under fresh pressure last month over its operations in China’s troubled Xinjiang region, after the Handelsblatt financial daily reported that forced labour may have been used to build a test track there in 2019.

Following the report, Volkswagen said it was in talks with its Chinese joint-venture partner SAIC “about the future direction of business activities in Xinjiang”.

Volkswagen CEO Oliver Blume said Wednesday that the company takes such allegations “very seriously” but “so far, we have not been able to confirm the information” provided.

In terms of the operation’s future, Blume insisted Volkswagen had a “responsibility” towards the employees in the joint venture in Xinjiang.

Volkswagen last year singled out China and the United States as key markets for its future growth, and it is also looking to increase profit margins.

Volkswagen sold 771,000 battery-powered cars in 2023, 35 percent more than the previous year, but still only 8.3 percent of the group’s total sales.

The carmaker has ploughed huge sums into producing more electric vehicles but there have been concerns that this shift is stalling, amid low demand and a weak global economy.

In recent months, Volkswagen has flagged plans to reduce its workforce and also unveiled a 10-billion-euro savings plan as it seeks to boost profitability and reboot the faltering electric shift.

Its profit margins are languishing at seven percent, below its long-term target of between nine and 11 percent.