Volkswagen Group said this past June that it needed to save 10 billion Euros, or about $15 billion CAD. The company's announced plan was aimed at increasing the overall profitability of its core brand, Volkswagen.
At the same time, industry experts’ reports concluded that production would exceed demand in Europe during 2023. Clearly, this was going to impact Volkswagen, the largest carmaker in the European market.
At the same time, the company's competitors seemed to be gaining ground. This has forced the German auto giant to make some tough decisions.
Today the company said it is reducing delivery targets for this year by at least half a million vehicles. However, it has maintained its financial targets for 2023.
Volkswagen points at ongoing logistical delas, which persist even as the supply of certain important parts, such as electronic chips improves. The company now plans to raise prices and cut costs in order to improve its financial situation.
By late morning, the company's shares had fallen by around 3 percent.
Volkswagen still rests on a very solid foundation, but electrification and the company’s desire to stay ahead of Tesla are proving costly. It will have to navigate more cautiously. Meanwhile, this pessimistic outlook is in stark contrast to that of several German rivals.
Indeed, according to Reuters, Mercedes-Benz said on Thursday that it was raising its outlook for the year. It claims that orders are flowing in and the supply chain is improving. The German brand announced profits of 5.6 billion USD for the second quarter, exceeding its forecasts.
Meanwhile, in the European market, Renault posted a record margin in the first half of 2023. It also returned to profit for the period, after registering a significant loss over the same period last year. The French company was helped by higher prices and the launch of new models.
And earlier this week, Stellantis - manufacturer of Peugeot, Jeep and other brands - also announced that it had exceeded its forecasts.
Volkswagen is not in danger, but it needs to take a step back. Which of course means that it will then have some ground to make up.