Volkswagen revised its annual outlook downward for the second time in under three months, citing underperformance in its passenger car division, intensifying pressure on Europe’s largest automaker.
The company now anticipates a 2024 profit margin of approximately 5.6%, down from its previous estimate of 6.5-7%, and below the 6.5% expected by analysts. Sales are projected to fall by 0.7% to €320 billion ($356.7 billion), a reversal from earlier forecasts of up to 5% growth.
The weakened outlook mirrors similar downgrades from German automakers Mercedes-Benz and BMW, which have been grappling with declining demand in China, the world’s largest automotive market. Volkswagen’s latest announcement coincides with ongoing talks with IG Metall, Germany’s most powerful union, about pay and job security, negotiations that could lead to historic factory closures.
The automaker also cut its forecast for global deliveries, expecting around 9 million vehicles in 2024, down from earlier projections of up to 3% growth from 2023’s 9.24 million. Porsche SE (PSHG_p.DE), Volkswagen’s largest shareholder, followed suit by lowering its outlook.
Volkswagen’s share prices dipped slightly following the announcement, with concerns over falling demand exacerbated by a weakening global economy, a skilled labor shortage, and competition from cheaper Asian automakers.
These challenges are straining Germany’s export-reliant economy and its traditionally strong labor relations, which are facing new pressures as costs outpace wage growth.
Amid the broader global issues confronting the auto industry, political tensions have also emerged. In the U.S., China’s role in future auto production has become a contentious topic in the presidential election, with Republican candidate Donald Trump warning of Chinese dominance, while the Biden administration is proposing rules that could ban nearly all Chinese cars from entering the U.S. market.
