By Gary S. Vasilash
When you see the word challenge in any form in a financial announcement, know that this really means some variant of “we are really struggling but don’t want to make it seem as though we are anything other than in control.”
When Volkswagen Group announced its 2023 financial results there were:
Oliver Blume, CEO: “Volkswagen Group is entering the long-distance rate of transformation from a position of strength. At the same time, we are aware of our challenges and are tackling them consistently to leverage the enormous potential of Volkswagen Group.”
Arno Antlitz, CFO and COO: “In a challenging environment, Volkswagen Group delivered robust results in 2023.”
While the company has said that it expects 50% of sales to be electric vehicles by 2030, for the full year in 2023 Group EV sales were 8.3%. So essentially it has six years to add 41.7%.
In the release about its earnings there’s this:
“Volkswagen Group is convinced that the future of mobility is electric. While some countries continue to show an impressive pace of transformation, the ramp-up of electric mobility in other regions is unfolding less quickly than expected. Volkswagen Group’s strategy is therefore characterised by flexibility. While extensive investments are being made in the expansion of electric mobility, highly competitive, efficient, and attractive models with combustion engines will remain part of the product range during the transition phase. Improved and new plug-in hybrids complement the range in many markets.”
Which could be restated as:
“We’ve bet big on EVs and are seeing returns in some areas but not like we’d hoped overall. So we figure we’d better be sure to continue to offer things that have internal combustion engines under their hoods, with or without hybrid systems attached.”
Of course, placing bets is about the future.
If VW Group doesn’t ante up on what seems as though it will play out (i.e., at some point there will be a bona-fide acceptance of EVs by a mass market, not the level of acceptance that has been puffed up (take Tesla numbers out of the sales of EVs in the West and see how well they are doing)), then it will be in a bad situation at the point that it does.
But playing is not without a cost.
It, like other OEMs, are investing billions in electrification.
There are a couple of things that are going to make receiving a return somewhat problematic:
- Tepid consumer interest
- Cheap Chinese EVs
And it isn’t VW Group alone that needs to consider its play in relation to those two factors.
Which makes it all the more. . .challenging.
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