Volkswagen will not cut EV prices, despite 50 percent lower demand: CFO explains why

VolkswagenAG is actively working on cost-cutting measures while maintaining the prices of its electric vehicles (EVs), despite price reductions by some of its competitors. The move is part of their efforts to recover profitability, which was impacted by poor bets on raw material prices in recent quarterly reports. As per a recent Reuters report, the automaker has a program in place aimed at achieving savings of 10 billion euros (USD 10.6 billion) for its main passenger car brand.Although the program has faced delays, some cost-saving measures have already been put into action, according to Chief Financial Officer Arno Antlitz, who confirmed this in the report. Antlitz reassured that communication regarding the program would be made as soon as it is ready, and there is no need for concern over a short delay of a month or two.

The company is currently in the process of rejigging its strategy towards reducing fixed costs and enhancing productivity. In the process, it released preliminary third-quarter results, which led to a reduction in its profit margin guidance for this year, disappointing investors. Antlitz expressed dissatisfaction with the profitability of the company, which fell short of the ambitious targets in the third quarter.
Volkswagen, like other car manufacturers and industry analysts, has expressed concerns about the slower-than-expected growth in demand for electric vehicles (EVs). The company’s own order intake for EVs in Europe dropped from 300,000 in 2022 to 150,000 this year. Despite this setback, Antlitz indicated that orders have gradually increased in the third quarter, and they anticipate further growth in the coming months while remaining committed to their targets.

In the Chinese car market, where Volkswagen was a leader in the combustion engine era, the company faces competition from numerous local manufacturers in the EV segment. Volkswagen may experience a decline in battery EV market share in the next year or two, until the introduction of two new models produced in collaboration with China’s Xpeng.
Global interest rates have hindered the transition to EVs as well, this is also highlighted by the cancellation of the GM-Honda partnership and a warning from battery maker LG Energy Solution. Subdued demand has also led to some EV manufacturers, including Tesla, reducing prices to keep up with demand.

On Thursday, Volkswagen confirmed that it achieved sales of 78.8 billion euros in the third quarter, where operating profit increased by 14 percent to 4.9 billion euros. The company maintains its outlook of delivering between 9 million and 9.5 million vehicles to customers this year, with group sales revenue expected to be 10 percent to 15 percent higher than in 2022.