The Volkswagen Group has announced solid results for the first half of the year, demonstrating its strategic realignment and restructuring efforts. With a focus on long-term, sustainable growth, the Group delivered reliable performance and strong financial results. Sales in North America are showing improvement, while the Group is also strengthening its position in China through technological partnerships and capitalizing on the growing trend of fully electric vehicles.
Financial Performance
In H1 2023, the Volkswagen Group achieved an operating profit of EUR 13.9 billion, an increase of around 13 percent compared to the previous year. The corresponding margin was 8.9 percent, surpassing the guidance range of 7.5 percent to 8.5 percent. Operating profit stood at EUR 11.3 billion, primarily due to non-cash hedging effects mainly from commodity hedging.
In terms of revenue, the Group experienced an 18 percent growth to EUR 156.3 billion in H1, driven by a recovery in volume, solid mix, and pricing. Although vehicle deliveries in China declined by 1 percent, signs of recovery were observed towards the end of the reporting period.
The Group’s electrification strategy continued to gain momentum, with battery electric vehicles (BEV) representing a 7.4 percent share of total deliveries in H1. The Group also aimed to reach a BEV share of 8-10% of total deliveries in FY 2023. Despite challenges in the market environment, Volkswagen managed to increase its market share in Europe and remains the market leader in the BEV segment.
The Group’s net cash flow in H1 was influenced by logistics chain bottlenecks, resulting in a muted net cash flow of EUR 2.5 billion. However, Volkswagen Group aims to achieve a full-year net cash flow of EUR 6-8 billion, taking measures to ensure the lower end of this range is met.
China Expansion
Volkswagen Group is accelerating its strategic transformation in China, aiming to maintain its position as the most successful international OEM and one of the top 3 players in the market. Despite an initial challenging period in the first two months of the year, the Group’s delivery figures in China showed significant improvement from March to May compared to the previous year. A decline in June was attributed to non-recurring effects. The Group delivered a total of 1,451,900 vehicles in China in H1 2023.
In order to expand its product range and address promising customer and market segments in China, Volkswagen Group has entered into two partnerships in the region: a strategic partnership with Xpeng and an expansion of an existing cooperation between Audi and FAW/SAIC. These collaborations align with the Group’s “in China for China” strategy, allowing it to capitalize on market-defining trends and leverage the growth momentum of the Chinese market.
Brand Performance Programs
Each brand within the Volkswagen Group is launching its own Performance Program to enhance profitability and resilience. These programs set ambitious targets across the brands, focusing on improving margins, product mix, and vehicle equipment. The programs also explore emerging business models, such as mobility solutions, to generate additional profit. The Group aims to achieve efficiency through economies of scale and cost optimization in areas including development, materials, production, distribution, and fixed costs.
Realignment of Platforms
The Group is realigning its technology platforms to drive innovation and achieve economies of scale. Key advancements include the establishment of the group-wide SSP platform by 2024, followed by the introduction of the second-generation MEB+ platform from 2025. The Group’s battery strategy and ramp-up will be supported by the Unified Cell developed by PowerCo. The CARIAD organization is also being realigned to accelerate the execution of the E³ platforms and further develop software-defined vehicles.
Financial Outlook
Volkswagen Group confirms its financial outlook for FY 2023, with a slight adjustment in the delivery forecast to 9 to 9.5 million vehicles. The Group remains on track to achieve its sales revenue target. Supply chain disruptions have been easing, with pressure shifting from semiconductor shortages to transportation and logistics delays. Lower raw material costs and an improving logistics situation in H2 are expected to support the Group’s performance programs and strengthen its competitive position in an increasingly challenging market environment.
Conclusion
The Volkswagen Group has delivered solid financial results in H1 2023, driven by its strategic realignment and focus on sustainable growth. By expanding its presence in China, accelerating electrification efforts, and implementing brand performance programs, the Group aims to enhance its competitiveness and strengthen its position in key markets. With a clear plan, measurable milestones, and a commitment to value-driven production, Volkswagen Group is well-positioned for long-term success.