Volkswagen:Quarterly Results/2024 Q4

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See also: Valuation Model | Volkswagen:Quarterly Results/2024 Q3 |Earnings Season:2024 Q2 | Earnings Season:2024 Q1

Results and earnings call summary

Porsche Earnings call summary

Q4 2024 Porsche Earnings Call Transcript

2025 guidance

• CFO Jochen said they are confident that they will reach the 2025 guidance. "And a short and crisp answer would be, of course, we strongly believe in the 10% to 12%. Our internal projections are sitting well within that corridor. And if no tariff scenario hits us severely, we really have everything set up in terms of our cost programs, in terms of our targets in the market that we will reach the guidance."
• Jochen said Q1 will be muted, but that's a seasonal trend.
• Jochen said the order book has normalized but is sitting on a robust and healthy level.
• Jochen said they don't expect 2025 decline in deliveries to be as high as 10%. "We would expect that we will see a decline that is not as high as 10% but we do not want to disclose a concrete number at this point in time," he said. "Second question, demand in the United States is at a very healthy at a great level so that's a region that really helps us in filling our targets that we have."

Products

• Blume said they are receiving excellent feedback for the new products from customers and media all over the world.
• Blume said Porsche was ahead of market developments when it comes to electromobility. That's why they are revising their product planning in specific areas.
• Blume added that their product strategy would still enable them to achieve 80% BEV share by 2030.
• Blume said they will focus especially in the 911, where they see the biggest potential and margins. They will also bring a new SUV with combustion and hybrid engines and that will be differentiated from the Macan. They are hoping to bring this model in 36 months time.
• Blume said he has a feeling that the new Taycan has solved its quality problems and is now the best electric car in the world. He added that the E-Maca is well received.
• Blume said he's personally overseeing the development and testing of the electric Cayenne, which is now in pre-series stage.

Pricing

• Blume said Porsche showed strong pricing in 2024.
• Jochen said they will increase prices further in 2025, especially on the 911 and that will enable them to reach their margin guidance. "With the model year changes in the mid of the year, we will increase prices in most regions and most models," he said.

Supply chain

• Jochen said supply chain is expected to remain challenging in 2025 and in the short-term.

Medium term target

• Jochen said they now guide for group return of sales of 15% to 17% in the midterm (lowered from 17%-19%) since they don't expect China demand to recover in the foreseeable future, slow transition to electromobility and continued supply chain issues.
• Blume said they are still aiming for a group operating return on sales of more than 20% in the long-term.
• Tim from Deutsche Bank noted that midterm in the industry is usually three to five years.
• Blume said they will continue focusing on value over volume. He said in the future, Porsche will align its cost structures with around 250,000 vehicles per year. He added that he sees the company selling around 300,000 vehicles per year. "We will make, a adaption of our company structure to a 250,000. This does not mean that this is our volume target. I expect more a volume around 300,000, but always, well balanced in between, the value drivers." Blume reiterated that reaching the 250,000 profitable level is unrealistic with the current product planning.

Tariffs

• Jochen said the tariffs is giving them to some extent ''sleepless nights".
• Jochen said if the tariffs were to come they will first look into additional pricing since they have a great and loyal customer base. But they will do so in a differentiated way i.e increasing prices for the 911 and not for the SUV segment. He added that they will also look more into fixed cost to reduce the impact on margins.
• Jochen said at the moment they don't see localizing production in the US.

Competition

• Blume downplayed the competition in China, saying their performance in the region is driven more by the economic developments. "Talking about other car manufacturers, there's no Chinese, Chinese competitor. There are some where customers move in in the SUV segment to Li Auto, but there that's expectation in terms of roominess in the car and screens for watching videos. And that's a completely different use when you compare it, for example, with the Cayenne. The customers who love the sportiness, the driving dynamics of Porsche stick to the brand, and we still have some. Our market development is more driven by the financial crisis, real estate crisis we do have, and many of our customers are affected. Talking about Xiaomi, they are making records, for example, on racetracks, but these are prototypes, not not serial cars. And so, we are very relaxed on on this. They have done a good work, you know, without a doubt, copied elements from Porsche, from Taycan nine eleven, put it into the car, offering the car to to a lower price segment. But that's not a competition for Porsche and, even not what what they are doing on the racetracks because you can't compare the cars they're using there with our record cars we offer in in serial production."

Management changes

• Oliver Blume said the entire generation change will continue.

Management guidance and analysts estimates

Management guidance

Key items	Q4 2024	Y/Y
Revenue	€82.72 billion	-5.1%
Operating result	€5.0 billion	-20.8%
Operating return on sales	6.06%	-16.6%

Note: The above key items have been calculated from management's 2024 revenue guidance of €320 billion and operating return on sales guidance of 5.6%.

Analysts estimates

Key items	Q4 2024	Y/Y	2025	Y/Y
Revenue	€83.9 billion	-3.8%	€326.5 billion	1.46%
Operating result	€5.3 billion	-15.6%	€20.3 billion	9.7%
Operating return on sales	6.37%	-12.3%	6.21%	8.2%
Earnings attributable to Volkswagen AG shareholders	€3.7 billion	-21.6%	€13.5 billion	12.0%
EPS	€7.30	-21.5%	€26.87	12.0%

Analysts revisions at Seeking Alpha in the last three months

Key items	2024
	Upward revisions	Downward revisions
Revenue	12	5
EPS	0	0

Competitor results and expectations

General Motors

• GM's Q4 2024 revenue came in at $47.7 billion versus analysts estimate of $43.93 billion.
• CFO Paul A. Jacobson said in the earnings call that they expect a similar U.S. industry year over year to 2024.
• Jacobson said pricing was strong across the board. He added that demand was also strong in Q4. Although they expect strong pricing to continue, they are guiding a 1% to 1.5% year over year decline in pricing in 2025 in the North America market due to potential high incentives and a moderation in average transaction prices (ATPs). He pointed out that pricing was good in January but there is so much noise in it, hence they see it fit to be cautious.

Ford

• Ford reported automotive revenue of $44.9 billion in Q4, exceeding analysts estimate of $43.02 billion.
• CFO Sherry House said in the earnings call that pricing and inventories have normalized in the ICE segment.
• Sherry added that they are lower industry pricing of roughly 2%, driven by incentives.

Tesla

• Tesla's Q4 2024 revenue came in at $25.71 billion versus $27.26 billion expected.
• Tesla cited reduced average transaction prices (ATPs) across its Model 3, Model Y, Model S and Model X lines as a major reason for the drop in revenue.

Analysts opinions

Volkswagen is resilient

• Buy, €140: Analyst Philippe Houchois of Jefferies said Volkswagen is resilient and should be able to reduce costs considerably. He pointed out that last year was the peak of investments but the new year comes with CO2 limits and tariff concerns, which are the greatest uncertainties.
• Buy, €115: Analyst Tim Rokossa of Deutsche Bank pointed out that the business trends in Q4 demonstrates Volkswagen's status as a "top pick." He added that the order books for Western Europe are developing nicely.
• Market perform, €102: Bernstein Research said Volkswagen Group sounded more optimistic than Porsche.
• Sell, €75: Patrick Hummel of UBS said the end of 2024 may have turned out better than expected.

Volkswagen is likely to meet its 2024 targets

• Overweight, €100->€105: Analyst Henning Cosman of Barclays said the company is likely to beat its target for 2024 and stick to its dividend ratio of 30%.
• HSBC said Volkswagen had a strong momentum in 2024 , which is likely to continue into 2025.
• RBC said it raised Volkswagen’s adjusted EBIT estimates for 2024 and 2025 to 20.77 billion euros and 19 billion euros from 20.62 billion euros and 18.21 billion euros, respectively.
• Neutral, €98->€102: Analyst George Galliers of Goldman Sachs expects Volkswagen to report operating profit of 5.55 billion euros for Q4. He pointed out that the company is likely to set targets for 2025 that are above the consensus.

2025 will likely be another bad year

• Buy, €112: Romain Gourvil of Berenberg said "conditions are still dangerous". He pointed out that sales recovery is taking longer than expected. Gourvil added that the latest trade tensions between Europe, China and the USA are just the latest tip of the iceberg of bad news. He said favorable valuations at Volkswagen is a protection for these risks.
• Neutral, €114->€98: Analyst George Galliers of Goldman Sachs expects 2025 to be another challenging year for the European automotive industry. He said he lowered his operating profit estimates for for 2025 by an average of 9%.

There is a potential government support for the European automotive industry

• Buy, €125: Cited pointed out that there is a potential government support for the European automakers. The analysts cited the impending dialogue between the European Union and automakers in a "concept note" titled the "Strategic Dialogue on the Future of the European Auto Industry". They also cited a statement published by three French ministers asking the EU to immediately suspend the CO2 regulation. The analysts also said the German finance minister, Olaf Scholz has indicated that the EU is preparing a bloc-wide incentive plan for EVs, which cost reduce costs for Volkswagen.