Volkswagen shares fell on Wednesday following an overnight profit warning. This was partly due to the potential closure of an Audi plant and a 3.8% drop in second-quarter sales, primarily impacted by a significant downturn in China.
Deliveries in China, a crucial market for Volkswagen, were down nearly 20%. This drop is part of a broader decline in sales of combustion engine cars, which still dominate Volkswagen’s lineup in the country.
As China accelerates its shift towards an all-electric market, Volkswagen has announced plans to increase its battery-powered offerings in the coming years and focus on profitability despite local competitors slashing prices by up to 50%.
“We do not expect an easy year,” a Volkswagen spokesperson said. The company has lowered its 2024 operating return on sales forecast to 6.5-7%, down from 7-7.5%. Additionally, Audi is considering closing its Brussels site, which employs about 3,000 people, due to low demand for its high-end electric cars.
Volkswagen shares dropped 1.13% to 105.4 euros at 10:30 GMT, contributing to a 5.5% decline for the year. The potential closure or repurposing of the Brussels plant and other expenses could cost up to 2.6 billion euros ($2.8 billion) this financial year. A consultation process is currently underway to find alternative solutions for the site.
The future of Audi’s Brussels plant has been uncertain since the announcement that the follow-on model to the Q8 e-tron would be built in Mexico.
Rising orders for newer models, such as the Q6 e-tron, have led to a significant drop in interest in the older Q8 e-tron produced in Brussels. Audi acknowledged the struggle to compete with premium carmakers BMW and Mercedes in the transition to electric vehicles.
Stephen Reitman of Bernstein Research noted, “Products like the first-generation Q8 e-tron were halfway solutions – not the full clean sheet like Audi has done with its new premium electric platform.
The potential of the Q6 is higher.” Audi has promised a refresh in 2024 and 2025 with over 20 new EV and combustion engine models, followed by EV-only models from 2026.
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