Volkswagen Group posts solid H1 results and strengthens strategic position in China

Autor: Financial Market
3 min

Volkswagen Group posted solid H1 results for 2023, with rising sales revenue and strong underlying operating profit. This is in line with the Group’s “value over volume” strategy, announced at the recent Capital Markets Day.

The Group’s BEV strategy is also making further progress, with deliveries in the first half of the year increasing by around 50 percent year-on-year.

In Europe, the Group increased its BEV deliveries by as much as 68 percent, underscoring its position as market leader in Europe. As the year progresses, significantly shorter delivery times, the remaining high order bank of 1.65 million vehicles and stable demand should provide further tailwinds.

The solid net liquidity of EUR 33.6 billion in the Automotive Division also gives the Group the necessary strength and flexibility to continue investing in key regions and growth areas.

Solid financial results

In the first half of 2023, the Volkswagen Group achieved an operating profit before valuation effects mainly from commodity hedging outside hedge accounting of EUR 13.9 billion, an increase of about 13 percent.

This resulted in a corresponding margin of 8.9 percent, above the guidance range of 7.5 percent to 8.5 percent. Operating profit came in at EUR 11.3 billion (H1 2022: EUR 13.2 billion) largely due to non-cash hedging effects mainly from commodity hedging amounting to EUR – 2.5 billion (Q1 2023 EUR – 1.3 billion; H1 2022: EUR 0.9 billion).

Overall revenue grew by 18 percent to EUR 156.3 billion in H1 (H1 2022: EUR 132.3 billion), driven by a continued recovery in volume as well as solid mix and pricing.

Vehicle deliveries declined by 1 percent in China, although there were notable signs of recovery towards the end of the reporting period. Overall, the Group continued to see solid demand.

The Group’s electrification strategy continued to accelerate, with battery electric vehicles (BEV) representing a 7.4 percent share of total deliveries in the first half (compared to 5.6 percent in H1 2022) and including 18 percent year-on-year growth in China in Q2, demonstrating a positive trend. In a challenging market environment, Volkswagen was able to increase market share particularly in Europe where the Group remains the BEV segment market leader. In the context of a more challenging market environment, Volkswagen Group aims to reach a BEV share of 8-10% of total deliveries in FY 2023. Seasonal effects, along with the significantly reduced delivery times, are likely to contribute to a higher proportion of BEV sales in H2.

In view of the continuing bottlenecks in the logistics chains, net cash flow was muted at EUR 2.5 billion in the first half of the year. In anticipation of an improving logistics situation and minor production adjustments in the second half of the year, Volkswagen Group continues to target full-year net cash flow of EUR 6-8 billion and has taken decisive measures to ensure that the lower end of this range is met.

The automotive division’s net liquidity remained solid at EUR 33.6 billion at the end of H1, which will continue to support the Group’s targeted sustainable value strategy.

Oliver Blume, CEO Volkswagen Group: “We have strategically realigned and restructured the Volkswagen Group, with a clear plan and measurable milestones. In the first half of the year, the Volkswagen Group delivered reliably with very solid results.

Sales in North America are picking up, we are strengthening our position in China through technological partnerships and on top of that the trend for fully electric vehicles is moving in the right direction. What is important to us is long-term, sustainable growth, with a focus on value over volume.

Financial Outlook for FY 2023 confirmed

Volkswagen Group confirms the financial outlook for FY 2023 published on March 3, 2023. The outlook for deliveries is slightly adapted for 2023 from around 9.5 million to 9 to 9.5 million while the Group remains fully on track to meet the sales revenue goal.

As anticipated, supply chain disruptions have continued to ease in H1 2023, with pressure shifting from semiconductor shortages to transportation and logistics delays.

H2 should be supported by lower raw material costs and gradually easing logistical bottlenecks. The performance programs for the brands are designed to deliver their first results in H2, further strengthening the Group’s position in an increasingly competitive environment.

In line with the steering model announced at the recent Capital Markets Day, the Group’s focus remains on meeting profitability and cash flow targets. An emphasis on value-driven production is expected to support the already strong results.

Prioritizing sustainable profitability over volume growth will enable the group to meet operating margin and cash flow targets.