Volkswagen Group's solid performance in 2023, performance plan and record new product launches lay the foundation for the next step

Volkswagen Group's solid performance in 2023, performance plan and record new product launches lay the foundation for the next step

[Wolfsburg/Beijing, March 13, 2024] Despite the challenging market environment, the Volkswagen Group achieved solid performance in 2023. The accelerated pace of electrification and flexible product strategy enable the Group to meet the wide range of needs of customers around the world. 2023 is also a key year for the Group to advance its business restructuring. In many areas of the "Ten-Point Action Plan", the Group's progress has exceeded expectations. In 2024, the Group will usher in the year of its "global debut" and is expected to launch more than 30 new products, including high-performance pure electric vehicles built on the new PPE high-end electric platform. The Group is full of confidence in 2024 and looks forward to entering the "fast lane" of development from 2025. The Group's primary goal remains to achieve sustainable, value-creating growth.

Blume, CEO of Volkswagen Group, said: "With exciting products and clear strategic implementation priorities, we are confident about 2024. Volkswagen Group is in an advantageous position in the 'long race' of transformation. At the same time, we are fully aware of the various challenges facing the Group and are working hard to solve them in order to fully unleash the Group's huge development potential and promote the sustainable development of the Group. Compared with other automakers, our rich and continuously expanding product portfolio is our advantage, which enables us to fully meet the needs of various customers. This flexibility is our core competitive advantage for future success."

Robust market performance and performance solutions lay the foundation for the group's development

In 2023, Volkswagen Group achieved solid results in a challenging market environment, with its brands performing well. Thanks to the positive contributions of the regional markets, the Group delivered approximately 9.24 million vehicles in the full year, an increase of 12% year-on-year. The Group's operating revenue reached 322.3 billion euros, operating profit reached 22.6 billion euros, and net profit after tax reached 17.9 billion euros. This series of data shows the strong resilience of the Group's business model. Despite the significant negative impact of valuation effects on raw material derivatives, which had a positive impact on performance in the same period last year, the Group's operating return on sales remained at 7.0%. Operating profit excluding the above valuation effects was 25.8 billion euros, corresponding to a profit margin of 8%. Net cash flow of the Automotive Business Unit increased to 10.7 billion euros. At the end of 2023, the Automotive Business Unit had a net liquidity of 40.3 billion euros, further demonstrating the Group's very solid financial position. Earnings per preferred share of the Group reached 31.98 euros (up 2.26 euros, or 8%).

On March 1, 2024, the Volkswagen Group released key figures for the previous fiscal year and its outlook for 2024.

The Group's Management Board and Supervisory Board proposed to pay a dividend of 9.00 euros per share to ordinary shareholders and 9.06 euros per share to preferred shareholders at the General Meeting of Shareholders. Compared with the previous year, the dividend per ordinary share and preferred share increased by 0.30 euros respectively, with a dividend payout ratio of 28%.

The share of electric vehicles in total deliveries continues to rise

Over the past year, the Group's electrification transformation has made significant progress: the proportion of pure electric vehicles in the Group's total deliveries continued to rise, reaching a peak of about 10% in the fourth quarter. In 2023, the proportion of pure electric vehicles in the Group's total deliveries hit a record high of 8.3%. Volkswagen Group delivered a total of 771,100 pure electric vehicles last year, an increase of about 35% compared to 2022, and achieved growth in all regional markets. In Europe, the Group once again established its leading position in the pure electric vehicle segment.

Arno Antlitz, Chief Financial Officer and Chief Operating Officer of Volkswagen Group, said: "In the challenging year of 2023, Volkswagen Group's performance was solid, and we hope to continue this momentum this year. To ensure the sustainable success of the Group, in 2024, we will focus on new product launches, further cost optimization, more effective use of synergies within the Group, and by continuing to drive profitable growth in North America, the Group will occupy a solid position in the regional market."

Group investment will peak this year

The Group is firmly committed to implementing its strategic investment plan to further improve its competitiveness, expand its business in the most promising markets, and strengthen its product portfolio. By more effectively tapping into the synergies within the Group, the Group plans to keep its investment scale within 170 billion euros in the five-year plan from 2025 to 2029. The funds will be mainly invested in new products, regional markets, battery business, pure electric vehicle platforms, and advanced fuel vehicles with continuous hybridization. The Group's investment is expected to peak in 2024 and will be gradually adjusted thereafter. By 2027, the investment amount will approach the target level of 11% of operating income.

Performance plans will drive sustainable performance

Volkswagen Group is implementing the largest performance plan in the group's history, striving to achieve sustainable financial effects of more than 10 billion euros across the group by the end of 2024 to resist the impact of inflation and rising costs. The company is making every effort to reduce costs and increase efficiency, including optimizing raw material and product costs, reducing fixed costs and production costs, and increasing sales and after-sales service revenue.

The performance plan is open to all brands under the Group and will create three major opportunities: the plan will not only strengthen the Group's competitiveness and improve efficiency, but will also release financial potential to invest in product and new business development to better meet the needs of global customers in the long term. In addition, the plan will help to safeguard jobs and factory operations in the long term. The Group will continue to evaluate and develop the plan to effectively respond to the changing market environment.

PPE platform brings greater performance and flexibility

The high-end pure electric platform PPE has excellent performance, flexibility and scalability. With the advent of the PPE platform, the results of the group's reorganization have begun to emerge. Following the MEB platform, the PPE platform will further unleash the group's synergy in the high-end and luxury car market.

In 2024, the Group's product portfolio will be significantly upgraded. The launch of best-selling models such as Golf, Tiguan, Passat, Octavia and Superb with advanced hybrid technology and a series of pure electric MEB models will further consolidate the Group's market position. In addition, a large number of new pure electric models will follow, including Porsche's new pure electric Macan and Audi Q6 e-tron1 based on the PPE platform, and ID. 72 and ID.7 Tourer3, CUPRA Tavascan4 and ID.Buzz5 long-wheelbase models based on the MEB platform.

Due to the numerous product highlights, the Group expects that the order volume in the Western European market will grow rapidly in the coming months compared with last year. The order volume of the pure electric products currently on sale is also expected to increase. At the beginning of the new year, the Volkswagen Group has shown a more positive growth trend than the previous year.

Overall, Volkswagen Group is full of confidence in 2024. Relying on its strong platform advantages, the Group plans to launch more than 30 new products in 2024, the highest number in history. Thanks to its strong operating performance, the Group also plans to increase investment in battery strategy development and regional markets.

Strategic flexibility

Volkswagen Group firmly believes that electrification is the future of mobility. At present, the speed of electrification transformation in some regions is amazing, but in other regions, the progress is slower than expected. Therefore, Volkswagen Group has adopted a flexible strategy. In the transition phase of electrification, the Group will continue to provide competitive, efficient and highly attractive fuel vehicles while investing heavily in the field of electric mobility. The Group has also launched facelifted and new plug-in hybrid vehicles in many markets to further enrich its product matrix.

All Group brands contributed to the increase in operating profit

All of the Group's passenger car brands achieved good performance in 2023. In addition to strong sales growth, the brands also achieved growth in operating profit before special items after accounting for the valuation impact of raw materials.

The operating sales return of the Group's "core" brand cluster (Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, Skoda, SEAT/CUPRA) increased from 3.6% in the previous year to 5.3%. In the past year, the "core" brand cluster's sales revenue increased strongly by 21% to 137.8 billion euros, making an important contribution to the improvement in performance. With this result, the "core" brand cluster has taken an important first step towards achieving the strategic target return rate of 8%.

The sales revenue of the "Progressive" brand cluster (Audi, Lamborghini, Bentley, Ducati) will increase to 69.9 billion euros in 2023, an increase of 13%, operating profit will be 6.3 billion euros, and the operating return on sales will be 9.0% (12.3% in 2022). Excluding the negative impact of 1.4 billion euros caused by the valuation effect of raw materials, the operating profit of the brand cluster will increase from 6.6 billion euros last year to 7.7 billion euros, and the operating return on sales will rise from 10.6% in 2022 to 11.0%.

The "Sports Luxury" brand cluster (Porsche) continued to maintain its strong momentum, with sales revenue increasing to 37.3 billion euros (34.6 billion euros in 2022). Despite unfavorable factors such as product launch expenses and rising production costs, the operating return on sales reached 18.6%, which was basically the same as last year.

The operating profit of Volkswagen's financial services business was about 3.8 billion euros, down about one-third from the high point in 2022, mainly due to the expected correction in used car prices in 2023. In 2021 and 2022, the shortage of new cars due to the shortage of semiconductor materials led to an unprecedented increase in the residual value of used cars. The Group has taken measures at an early stage to hedge the related risks.

The operating income of the "Truck" brand cluster (Transtrac Group: MAN, Scania, Navistar, Volkswagen Trucks and Buses) increased from 39.5 billion euros to 45.7 billion euros, mainly due to the growth in sales, positive market and product mix, better unit prices, and the growth of automotive service business. Transtrac Group's operating profit margin also increased significantly from 4% in the previous year to 8.1%, and operating profit increased from 1.6 billion euros to 3.7 billion euros.

As the software developed by CARIAD is increasingly being used in the Group's vehicles as planned, CARIAD's licensing fee income increased by about 30% to 1.1 billion euros. Affected by its business model, CARIAD lost 2.4 billion euros last year. CARIAD has invested a lot of upfront resources to develop future software architectures, and these investments will generate revenue in the form of licensing fees in the future. In terms of operations, the Group is accelerating the launch of core software products. For example, the Porsche pure electric Macan and Audi Q6 e-tron will be launched this year.

The battery business continues to make progress. Due to high investments and the cost of building teams in different countries, the business segment experienced an operating loss of 400 million euros and a net cash outflow of 800 million euros. These investments are crucial to the strategic layout of the Group's battery business and will drive the Group's electric vehicle production.

Accelerate transformation with clear China strategy and decision-making

In China, Volkswagen Group is further accelerating its pace of innovation, promoting technology localization, and always adhering to customer-centricity. The Group adheres to the development policy of "in China, for China" and has implemented a series of important strategic initiatives in 2023.

"Based on the 'In China, for China' strategy and Volkswagen Group's deep layout in the Chinese market for 40 years, we are quickly tailoring our product portfolio for Chinese customers," said Berard, the director of Volkswagen Group responsible for China's business. "With the ongoing price war, the market environment will remain challenging in the next two years. We are constantly strengthening our technological capabilities to lay a solid foundation for the sustainable development of our future business. For the Group, creating value is more important than market size, which can ensure that we invest in the next leap in innovation."

In order to meet market demand faster and grasp development trends, Volkswagen Group is constantly improving its R&D capabilities. Volkswagen (China) Technology Co., Ltd. (VCTC) will play a key role in this. The Group has laid out advanced production, R&D and innovation centers in Hefei. Volkswagen (China) Technology Co., Ltd. is its core, which will shorten the product development cycle by 30% to fully utilize the growth potential of the Chinese market. At the same time, Volkswagen (China) Technology Co., Ltd. will develop an entry-level model platform (CMP) for the Chinese local market at the "China speed". The first batch of models based on this platform will enter the market as early as 2026. To further strengthen the electrification offensive, the Group has also established partnerships with Chinese local automakers Xiaopeng Motors and SAIC Group to supplement the Group's product portfolio based on global platforms. From 2025 to 2026, the Group will open up new segments in the vibrant Chinese electric vehicle market. Volkswagen Group has formulated a clear product roadmap: by 2030, the Group's brands will offer no less than 30 pure electric models.

At the same time, CARIAD China's more than 1,000 software experts are accelerating the integration of the latest digital technologies into the models of Volkswagen Group's brands. To further deepen its development in China, the Group has also established partnerships with Chinese high-tech companies, including: cooperating with Horizon Robotics to develop autonomous driving technology, cooperating with Thundersoft to develop infotainment systems, and cooperating with Shanghai Muchuan Industrial Design to enhance user experience.

In 2024, Volkswagen Group will continue to adhere to the "In China, for China" strategy, continue to promote the localization process, accelerate research and development, apply intelligent technologies to the products of the Group's brands more quickly, and steadily expand the intelligent connected vehicle product portfolio. To ensure the implementation of strategic initiatives and strategic investments, the Group is further optimizing its cost structure to provide Chinese customers with more economically competitive products.

“Regenerate +” strategy: Volkswagen Group fully implements the concept of sustainability

The Volkswagen Group promotes sustainable development in all aspects: covering nature, employees, society and entrepreneurial spirit to create value. To this end, the Group has developed a comprehensive sustainable development strategy. This strategy covers the entire Group and is the cornerstone for all brands under the Group to carry out sustainable development projects.

The accelerated development of electric mobility is the key to reducing carbon emissions. In 2024, Volkswagen Group will vigorously promote the electrification process and assume social responsibility through its sustainable development strategy. For example, Volkswagen Group is promoting one of the most ambitious electrification offensives in the automotive industry, covering all market segments.

The Group further focuses on carbon reduction in the production process. Volkswagen Group plans to achieve net zero carbon neutrality in all global production bases by 2040, which will be achieved 10 years ahead of schedule. Based on the 2018 level, the Group is committed to reducing greenhouse gas emissions by 90%, and plans to achieve this goal by changing the energy supply structure and improving energy efficiency. For example, by 2030, global factories including China will achieve 100% external electricity supply from carbon-neutral energy. At present, all of the Group's factories in Europe are 100% using green electricity, and eight European factories have achieved net zero carbon neutrality in operation.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.

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