What Will Be The Jump In Volkswagen’s Valuation If Audi Sells More Cars Than Expected?


Audi, the luxury brand owned by Volkswagen AG (OTCMKTS:VLKAY), forms ~13% of the group’s valuation, as per our estimate, and this doesn’t include the value from Audi’s China sales — as the China business is accounted for using the equity method of accounting.  China sales form about ~30% of worldwide Audi sales.  Audi’s business and brand image have been hampered by the news of the emissions scandal, which broke out last September.  The brand has seen sales, excluding China, rise 4.6% year-over-year in the first seven months of this year. However, Trefis estimates Audi sales (excluding China) to rise at a CAGR of 1.8% between 2016 and 2021 due to the expected slowdown in developed markets such as North America and Europe, where the refilling of fleet already took place in the last couple of years after a prolonged period of weak economic conditions, and increased volatility in emerging markets. However, if the situation becomes better going forward, and Audi is able to increase its sales by more than expected, the impact on Volkswagen’s valuation of this upside could be as much as 8%.

In the upside scenario, Audi’s market share could grow by 30 basis points each year between 2016-2021, compared to the currently expected growth of 3-5 basis points each year. On the other hand, revenue per vehicle could grow at a CAGR of 3% as compared to the current estimate of 1.4% CAGR in the five-year period. The incremental sales are also expected to boost the margin for the company.

Volkswagen Q&A 26

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Have more questions on Volkswagen? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Volkswagen

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