Volkswagen:Quarterly Results/2023 Q1

See also: Volkswagen | Volkswagen:Quarterly Results | Earnings Season:2023 Q1

Results

Volkswagen posted impressive results. Here is the summary.

• Volkswagen Q1 2023 revenue grew 22% year-over-year to 76 billion euros ($84.22 billion), above analysts estimate of 71.88 billion euros(+14.64%).
• Operating profit decreased 31% y/y to 5.7 billion euros due to "due to negative non-cash effects mainly from commodity hedging outside hedge accounting of EUR 1.3 billion in Q1 2023." This was above analyst estimates of 5.48 billion euros.
• Operating margin increased to 9.3%, "and was therefore above the forecast target corridor for the Volkswagen Group of 7.5 to 8.5 percent."
• Volkswagen said the rise in revenue was attributed to growth in Europe and North America.
• The company confirmed its outlook for 2023. "Volkswagen Group has made an encouraging start to 2023. We saw strong growth in revenues and operating profit before the non-cash valuation effects from commodity hedging. With this solid performance and an order book of 1.8 million vehicles at the end of Q1, we confirm our financial outlook for 2023," CFO and COO Arno Antlitz said.
• They are confident that China deliveries will recover. "The company is confident that the deliveries in this region can recover throughout the year on the broadened model offering and China-specific technology," the statement said.

Analysts Estimate

Key Items	Q1 2023	Y/Y Growth
Revenue	EUR 71.88	14.64%
EPS	EUR 7.03

Things to be checked during earnings

• Pricing
• China revenue performance as well as commentary
• Impact of the economy on the business
• Supply chain issues
• 2023 guidance
• Revenue
• EPS

Competitor Results

Tesla

Tesla's net income declined by 24% year-on-year due to price cuts, higher raw material, commodity, logistics and warranty costs, as well as lower revenue from environmental credits. Its automotive revenue rose by 18% year-on-year to $19.96 billion. Meanwhile, gross margins dropped to 19.3% from 29.1% same quarter last year after a series of price cuts. Additionally, its automotive gross margin came in at 18.3% versus 20.5% expected by analysts.

During the earnings call, Elon Musk said that he expects 12 months of "stormy weather" in the economy and that " provided there are no major geopolitical wildcards that show up, that things start getting sunny around spring next year."

He also pointed out that “Every time that the Fed raises interest rates, that’s the equivalent to an increase in the price of a car.” Musk also said that "whenever there is uncertainty in the economy, people will generally postpone new -- big, new capital purchases like a new car."

On Tesla's marketing strategy, Musk said “We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and higher margin.” This is proven by its decision to cut prices for some of its Model Y and Model 3 electric vehicles in the U.S for the sixt time on Tuesday. Model Y “long range” and “performance” and Model 3 “rear-wheel drive” prices were cut by $3,000 and $2,000, respectively on Tuesday. He believes that over time Tesla will be able to generate more margin through autonomy.

When asked about demand for its vehicles following its most recent price cuts, Musk said, " I think the overall thing we can say is that orders are in excess of production."

Despite Musk's warnings that the rising interest rate will hurt consumers, the company continues to have an optimistic view of demand. They maintained their production outlook for the year at 1.8 million vehicles(+31% year-over-year).

Summary of results

Key Items	Q1 2023	Analysts expectations	Y/Y Growth
Revenue	$23.33 billion	$23.21 billion	+24%
Net Income	$2.51 billion		-24%
EPS	$85 cents per share	$85 cents per share
Automotive Revenue	$19.96 billion		+18%
Gross Margins	19.3%
Automotive Gross Margin	18.3%	20.5%

Insights for Volkswagen

• Demand for EVs is strong.
• Reduced gross margin for Tesla cars will hurt demand for Volkwagen's EVs.
• Volkswagen is likely still facing high raw materials, commodity, logistics and warranty costs.

General Motors

General Motors reported revenue and earnings that beat analysts estimates. Revenue during the quarter was up 11.1% to $39.99 billion, above analyst estimate of $38.96 billion. On the other hand, earnings per share was $2.21 versus $1.73 expected by analysts.The great results were due to cost cutting measures such as employee buyout program as well as continued demand for its high-end vehicles. However, China income performed dismally as it declined by 64.5% to $83 million.

Regarding the price wars initiated by Tesla, the company said that it will not take part on it. GM CEO Mary Barra said officials “feel good about where we’re priced right now.”

Summary of results

Key Items	Q1 2023	Analysts expectations	Y/Y Growth
Revenue	$39.99 billion	$38.96 billion	11.1%
EPS	$2.21	$1.73
China equity income	$83 million		-64.5%

Insights for Volkswagen

• VW China may continue seeing declines.
• VW premium vehicles will continue seeing strong demand.
• VW may also choose not to engage in price wars initiated by Tesla.

Stellantis

Stellantis said improvement in semiconductor supply and price increases made its revenue to rise 14% to 47.2 billion euros ($52 billion). However, the company said it's still facing logistics issues in Europe and that the macro environmrnt is still challenging. "In Europe ... we have some challenges transforming company's stock into dealer stock and therefore getting orders fulfilled with customers, which is still a challenge for our market share," CFO Richard Palmer said. "It is a bit early to change any of our full-year forecasts," he said. "Clearly the macro situation is still complex."

Insights for Volkswagen

• Semiconductor supply has improved.
• Logistics issues is still a challenge.
• Aggressive pricing strategy is being persued by automakers.