What’s New With Volkswagen Stock?

Volkswagen stock (OTCMKTS: VWAGY) has underperformed, with the stock down about 20% over the past twelve months. In comparison, rival GM shares have remained roughly flat over the same period. Several factors have impacted the stock in recent quarters due to a weak macroeconomic environment, high domestic costs, soft EV demand, and growing competition from lower-cost Chinese players.

Pressure On Multiple Fronts

Volkswagen’s U.S. business also faces considerable headwinds following the sweeping tariffs imposed by President Donald Trump. About a third of Volkswagen-branded vehicles sold in the U.S. are imported, with 100% of Audi and Porsche vehicles sold in the country being imported. The company has outlined plans for substantial investments in the U.S., although this is likely to have a long timeline. China, which is the company’s single largest market also remains difficult amid an intense price war and the rise of local EV brands. Group sales fell by 9.5% to 2.9 million units in China last year. In response, Volkswagen has been doubling down on its localization, with plans to launch more than 30 new models in China over the next three years, including both ICE vehicles and new energy vehicles tailored specifically for local consumers.

VW is also looking to considerably streamline its German operations via a broad restructuring. The company plans to cut production capacity in Germany by over 700,000 units and reduce headcount by 35,000, mostly via voluntary exits, by the end of this decade. These moves are aimed at restoring profitability in Europe, where demand has weakened and costs remain elevated. VW is also repositioning its Wolfsburg plant as a hub of its EV future. A new entry-level EV priced at around Euro 20,000 ($21,000) will go into production there in 2027. The auto giant expects affordable EVs to play a key role in helping it regain its market share, particularly as pricing becomes more competitive.  Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P and clocked >91% returns since inception.

Is VW Stock A Good Value?

We think that VW stock looks like a decent value at current levels of about $10 per share. VW stock trades at just about 5x trailing earnings, which is even below U.S. automaker Ford which trades at about 6x.  The stock also has a thick dividend yield of close to 7%. While VW’s EV transition may be going at a slow pace, the company could have some advantages in the long run. VW has a vast umbrella of brands that could offer consumers considerable choice while giving the company economies of scale as it standardizes its platforms, potentially helping to improve margins. VW is also focusing on backward integrating its EV operations by investing in building out its battery plants. The company has also been taking steps to unlock value from its brand portfolio.

VW took its sports car brand Porsche public in 2022 and we think that it could do the same with its Lamborghini supercar brand, given the premium that investors are placing on luxury and performance brands.  For example, Ferrari has a market cap of over $80 billion, which is higher than VW’s current market valuation. We value VW stock at about $12 per share, which is about 20% ahead of the current market price. See our interactive analysis on Volkswagen Valuation: Expensive Or Cheap? for more details. See our dashboard on Volkswagen Revenue for an overview of Volkswagen’s business model and how its revenues are likely to trend.

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