Weak demand for automobiles, Volkswagen once again lowers annual expectations

According to the financial news app Zhitong Finance, Volkswagen AG (VWAGY.US) is facing increasing pressure. Due to weaker-than-expected performance in its passenger car division, the largest European automaker lowered its annual outlook for the second time in less than three months on Friday. The company revised its global delivery volume expectations to around 9 million vehicles, lower than the previous forecast of reaching 9.24 million by 2023 with a maximum 3% growth, and sales are expected to decline by 0.7% to 320 billion euros (equivalent to 356.7 billion US dollars), initially projected to increase by up to 5%. Volkswagen currently anticipates a profit margin of around 5.6% in 2024, lower than the previous 6.5%-7% and also below LSEG's 6.5% expectation. Volkswagen stated that due to challenging market conditions and development below initial expectations, especially in Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, and the technology components brand, the company has adjusted its outlook. Following the announcement, Volkswagen's stock in the US market briefly dropped by 1.7%. Earlier this month, as a result of weak demand in the world's largest automotive market China, Mercedes-Benz and BMW both lowered their annual forecasts. This adjustment by the German automaker, which holds majority stakes in Porsche and truck giant Traton, is the latest move in the automotive industry. Just two days ago, Volkswagen engaged in crucial negotiations with Germany's most powerful union, IG Metall, regarding wage and job protection issues. This historic conflict could potentially lead to Volkswagen's first factory closure in Germany. Porsche, the holding company of Porsche and Piech families, holds the majority of voting rights in Volkswagen and is its largest single shareholder. Following the downgrade of Volkswagen's rating, Porsche's holding company also revised its rating outlook. The global economic slowdown has impacted Germany's export-oriented economy, while skilled labor shortages, high energy prices, and lower-cost Asian competitors have put pressure on local industrial giants like Thyssenkrupp and BASF. These issues also challenge Germany's long-standing model of negotiating with powerful unions, which has been seen as an advantage during demand growth but becomes a burden when costs exceed wage expectations. The fate of the automotive industry and the pressure from the Chinese market demand have become global industry issues, affecting European automotive elites who have been striving to maintain full factory capacity. Volkswagen is scheduled to announce its third-quarter performance on October 30th, with the company currently estimating a net cash flow of around 2 billion euros for its automotive division, lower than the previous 2.5 billion to 4.5 billion euros