The Volkswagen logo is seen at the New York International Auto Show Press Preview, in Manhattan, New York City, USA, March 27, 2024.
David Dee Delgado Reuters
Volkswagen shares dipped Wednesday after the company issued a profit warning overnight and announced it is considering the potential closure of the Audi plant in Brussels.
The company has now lowered its forecast for operating profit on sales to a range of 6.5% to 7%, from 7% to 7.5% previously.
He noted that it is also considering the restructuring or the potential shutdown of the Audi factory in Brussels, where it has 3,000 people, due to the lack of demand for the Audi Q8 e-tron line – the electric offering of the brand, which will be launched in 2019.
Automakers have been grappling with declining demand for electric vehicles, with European brands facing a combined challenge from a wave of discount, state-subsidized rival vehicles produced in China. The EU earlier this month began implementing temporary tariffs on EVs imported from China, as a result.
If it goes ahead, it would mark Volkswagen’s first plant shutdown in nearly four decades, since the plant’s closure in 1988 at its Westmoreland site in Alabama.
The cost of prospective closure or finding an alternative use for the site, among other factors, could result in up to 2.6 billion euros ($2.81 billion) to the company’s operating profit in fiscal year 2024, Volkswagen said.
Deutsche Bank analysts qualified the potential shutdown of the Brussels factory as “a major step in the right direction,” anticipating related costs not cash-relevant in the short term. Analysts at brokerage Stifel meanwhile labeled Audi as “Volkswagen’s biggest problem” and “the biggest concern for investors” on a divisional basis.
“The bigger problem is the heavy delays in new models in recent years; Audi has fallen behind Mercedes and BMW. We calculate that the average age of Audi’s portfolio is now six years (BMW: three years, Mercedes 3.6 years ), he said.
Volkswagen has also suffered a slump in overall deliveries. The Volkswagen Group delivered 2,243,700 vehicles worldwide in the April-June period, according to the Frankfurt, Germany stock exchange – down 3.8% on the same period last year. Audi’s performance weighed on results, down 11.3% year-on-year in three months.
Shipments to China fell 19.3% in the second quarter, but rose 5.1% in Western Europe and 10.8% in North America.
Volkswagen stock was down 1.45% at 11:14 am London time on Wednesday. The company is scheduled to present its second quarter results on August 1.
— CNBC’s Ganesh Rao contributed to the report.
