The Volkswagen Group Reports Lower Operating Margin and Profits for Its Audi Division, but Main Division Sees Increased Profitability
The German car manufacturer announced on Wednesday that its Audi division achieved an operating return on sales of 9% in 2023, compared to 12.3% in 2022, as the premium group struggled with high material costs and the impacts of commodity hedging. Operating profit for the unit, which includes the Audi, Lamborghini, Bentley, and Ducati brands, dropped to 6.3 billion euros ($6.89 billion) from 7.6 billion euros. Adjusted for commodity hedging and currency effects, the operating profit reached 7.7 billion euros with a return on sales of 11%. The division's revenue increased by 13% to 69.9 billion euros.
Volkswagen's Core Brand Group Reports 5.3% Operating Margin for 2023, Up from 3.6%, Amidst Revenue Jump; However, CFO Arno Antlitz Notes at Press Conference that it Trails Some Competitors. The sales of the mass market unit, including Volkswagen, Volkswagen Commercial Vehicles, Skoda, Seat, and Cupra, increased by 21% to 137.8 billion euros. The unit concluded the year with an operating result of 7.27 billion euros compared to 4.045 billion euros the previous year.
The Automotive Giant reported that vehicle sales in the Asia-Pacific region remained stable at 3.6 million. However, revenue fell to 50.1 billion euros from 51.4 billion euros due to intense competition. This figure excludes revenue from Chinese joint ventures. Volkswagen has also set a lower operational profit target for its Chinese joint ventures in a highly competitive market. The car manufacturer expects a proportional operational profit of 1.5 billion euros to 2 billion euros for its joint ventures in the world's largest automobile market, compared with a total of 2.6 billion euros in 2023, UBS analysts said in a note. The weak forecast could lead to a reduction in consensus estimates for earnings per share by up to 5%, the analysts said.
Cariad, the software arm of the Volkswagen Group, recorded an operating loss of 2.4 billion euros. The result was due to the division's business model, which includes prepayments for future software architecture, according to the company. Revenue from software licenses rose by about 30% to 1.1 billion euros. CEO Oliver Blume said at a press conference that he had removed some bureaucratic obstacles in the troubled software unit and the company was considering partnerships with major technology companies.
Volkswagen indicated that PowerCo, the company's battery business, reported an operating loss of 400 million euros and a net cash outflow of 800 million euros. "This relates to investments in the Group's battery activities, which are essential for the successful ramp-up of electric vehicle production," said Volkswagen. The financial services division reported an operating profit of 3.8 billion euros, compared to 5.6 billion euros in 2022, due to lower used car sale prices following an increase caused by the chip shortage in the years 2021 and 2022. The company also announced that it now aims to achieve a CO2-neutral balance at its production sites worldwide by 2040, ten years ahead of the previous target. Volkswagen already reported other key financial results for 2023 earlier this month.
