For Q3 FY'25, VW's revenue rose 2% to €80.3 billion (about $92.9) - driven by slightly higher volumes, although it swung to a €1.3 billion operating loss compared to a prior profit, hit by Porsche restructuring and US tariffs-related costs.
Volkswagen is struggling in China due to fierce competition from domestic EV makers such as BYD and an ongoing price war. Chinese consumers are increasingly favoring domestic brands that offer feature-rich and affordable EV options. In 2024, the company's deliveries in China fell by 9.5% year-over-year.
Below are the key drivers of Volkswagen's value that present opportunities for upside or downside to the current Trefis price estimate for Volkswagen AG:
Volkswagen China & Affiliates Vehicles Sold:
Sales volume has declined from 3.4 million in 2020 to 2.6 million in 2024. We expect the Chinese business to see a decline in the long term amid surging competition. However, if sales rise to about 4 million units, driven by a strong uptake for EVs, we could see a 10% upside to our price estimates. On the other hand, if tighter regulations and unfavorable monetary policies result in sales touching 1.5 million units, there could be a 10% downside to our price estimate.
Volkswagen AG, headquartered in Wolfsburg, Germany, is one of the largest global automotive companies in terms of the number of vehicles sold annually. In addition to producing Volkswagen-branded passenger cars and light commercial vehicles, Volkswagen AG, along with its subsidiary companies, also sells passenger cars under various automotive brands, including Audi, Bentley, Skoda, SEAT, and Lamborghini.
Its commercial vehicles, engines, and turbomachinery are marketed under the Scania and MAN brands. Volkswagen AG also offers financial services, including leasing and fleet management. With the acquisition of Ducati, the group expanded into the motorcycle segment. China is Volkswagen’s largest sales market and a major driver of its profitability. Additionally, the company has held the largest market share in Europe for over two decades.
Luxury brands are essential for Volkswagen, whose operating margin is much less than the 10-11% margin at which Toyota typically operates. However, VW's luxury brands account for the bulk of the company's EBITDA despite contributing just about a third of revenues. This is because the average unit pricing of a luxury car is well over $50,000, compared to just under $30,000 for the average price of vehicles overall. Margins are also meaningfully higher.
The operating margin of Volkswagen's Financial Services is higher than the automotive division. The division has also posted more consistent growth than the automotive business.
