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After last year's record numbers, new business has begun to wane this year

After last year's record numbers, new business has begun to wane this year

Despite a slowdown in new business, German auto giant Volkswagen set new sales and profit records last year. As backlogs of orders were processed after the chip shortage ended, deliveries, sales and operating profits increased, the group announced Friday based on preliminary figures. But new business is flagging and rising costs, especially for Volkswagen's core brand, are putting pressure on profitability.

Thanks to the strong final boom, sales of all the Group's brands increased by almost twelve percent to 9.24 million vehicles in 2023. Sales rose even more strongly, rising by 15.5 percent to 322.3 billion euros. A higher proportion of newer, more expensive and better-equipped vehicles boosted sales, as did higher selling prices. A company spokesman added that operating results increased by only 2% to 22.6 billion euros, slightly higher than the previous record result for 2022. Volkswagen did not initially provide any information on net profit. The group plans to present its full 2023 balance sheet on March 13.

“2024 will require a lot from us.”

“2023 was a strong year financially,” CFO Arno Antlitz said in an internal interview made available to the German news agency DPA. “However, we have to prepare ourselves better for the future.” The increase is mainly due to a backlog of orders that VW began in 2023. Due to a shortage of parts such as chips, VW was unable to build as many cars as were ordered and delivery times were long. “We have pretty much processed that backlog of demand back to a normal level,” Antlitz said. Meanwhile, only a few new orders are coming in. “Currently received orders are still below our 2024 plans.” This is especially true for electric cars. “2024 will demand a lot from us.”

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CEO Oliver Bloom has prepared the group for a transitional year. “2023 was an important year for the Volkswagen Group in terms of our reorganization,” he said, according to the statement. “The cleaning work has been completed.” The main course of restructuring the group he initiated has now been set. “We can build on this in 2024 and have a solid foundation for accelerated intensification from 2025.”

“Very far from competitors’ returns”

The group was particularly dissatisfied with the return on sales, which shrank from 7.9 to just seven percent. For every €100 that comes in as sales, only seven euros remain on the cash register as operating profit. This means we are “still far behind the returns of our competitors,” the CFO criticized. “This is especially true for our high-volume brands, especially the Volkswagen brand.”

The billion-dollar savings and profit programs that Volkswagen has launched across its brands aim to help. According to previous information, the core brand Volkswagen is expected to improve its profits by four billion euros this year, and by 2026 it should reach ten billion euros. “That's why we look forward confidently to 2024 despite the weak economic outlook and intense competition,” Antlitz said. Sales revenue is expected to rise by up to five percent, and return on sales is expected to be at least slightly better than in 2023 at 7 to 7.5 percent.