ii view: Volkswagen EV demand generates optimism

First-half results to 30 June

• Revenue down 0.3% to €158.4 billion
• Profit down 33% to €6.7 billion

Guidance:

• Now expects full-year 2025 revenues to prove flat, down from a previous estimate of up to 5% growth
• Now expects a 2025 profit margin of between 4% and 5%, down from a previous 5.5% to 6.5%

Chief executive Oliver Blume said:

“Driven by the success of our new products, Volkswagen Group held its ground in an extremely challenging environment. We made noticeable improvements in design, technology, and quality, and achieved significant progress in software. 

“Supported by our ongoing product offensive and consistently good demand, we expect the positive trend to continue in second half of the year.”

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ii round-up:
 
Volkswagen AG (XETRA:VOW) last week downgraded expectations for 2025 due to ongoing US trade tariff uncertainty, but detailed positive customer demand given new electric vehicle (EV) models.

Revenues for 2025 are now expected to prove broadly similar to 2024, down from a previous estimate for growth of up to 5%. Order intake for Western Europe increased 19% during the first half, pushed by a 62% increase in demand for new EV models such as the VW ID.7 Tourer and the Škoda Elroq.

Shares in the DAX 40 company fell 2% post results European trading, although later recovered to a gain of 3% amid hope for a trade deal between the EU and the US. VW shares are now up by just over a tenth so far in 2025. The DAX index is up 22% year-to-date, with rival Tesla Inc (NASDAQ:TSLA) down by a similar amount.

Volkswagen revenues for the first half to late June fell 0.3% year-over-year to €158.4 billion. A combination of restructuring expenses, currency headwinds and costs in relation to CO2 regulation pushed profit down by a third to €6.7 billion. 

As well as Volkswagen and Skoda, other group brands include Audi, Seat, Cupra, Porshe and Ducati. The vehicle giant sold 4.36 million vehicles in H1 2025, up from 4.34 million a year earlier, with 19% and 2% gains in South America and Western Europe more than countering 3% and 16% falls in China and North America.  

Trade tariff uncertainties and a profit warning from commercial vehicle maker Traton, in which VW owns a significant share stake, are now expected to see full-year operating profit margins coming in at 4-5%, down from a previous 5.5-6.5%. 

Broker Deutsche Bank highlighted Volkswagen as its ‘top pick’ in the European car making sector, with tariffs masking a solid underlying performance. 

Third-quarter results are scheduled for 30 October. 

ii view:

Began in 1937 and headquartered in Wolfsburg, Germany, VW today employs over 650,000 people. The group operates 115 production facilities across 17 European countries and 10 countries elsewhere in the world with 2024 revenues totalling €324.7 billion. As well a retaining a shareholding in the previously wholly owned Porsche Automobil Holding SE Vorz-Inhaber-Akt stimmrechtslos (XETRA:PAH3), other interests include a joint venture with US EV maker Rivian Automotive Inc Class A (NASDAQ:RIVN)and a shareholding in China’s owner of the MG brand SAIC.   

For investors, uncertainties regarding US trade tariffs and specifics in relation to the auto industry persist. Lower cost carmakers in China have been targeting expanding sales in Europe and the US. Stretched government finances in countries such as the UK could see taxes rising pressuring consumer demand, while industry wide uncertainty over the dominant fuel type going forward has left VW still covering all bases.   

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To the upside, a focus on new EV models appears to be aiding customer demand. The group’s diversity of brands regularly helps to even out the ups and downs of each. Tough restructuring decisions have already been taken, while an estimated future dividend yield of over 5% is not to be ignored. 

On balance, the difficult economic outlook and highly competitive auto industry offer room for caution. That said, a restructured company and a consensus analyst fair value estimate above €130 per share are likely to see investors remain interested. 

Positives: 

• Strong brand names including Audi and Volkswagen
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• High EV competition

The average rating of stock market analysts:

Buy