After BMW, Volkswagen Cuts Guidance, Worsening Global Outlook

Volkswagen Group shares were down 4% in the Berlin stock exchange after the company cut its guidance, a negative but not shocking move. The car maker now expects deliveries to customers to flatten this fiscal, against the earlier guidance of a 3% increase in volumes.

This comes after BMW also cut its guidance and said it expects deliveries to be lower this year from last year.

Volkswagen now expects group sales revenue to be around 320 billion euros, lower than the revenues of 322 billion euros in 2023. This will roughly be a 1% decrease in revenues versus a previous forecast of a 5% increase.

Operating return to sales will also be of around 5.6% now, versus previous guidance of 6.5% to 7%.

The company highlighted that the deterioration in the macroeconomic environment is having a negative impact, which could result in further risks, particularly for the Brand Group Core—the organisational merger of the company's volume brands.

In financial year 2024, the financial services division expects to achieve an operating profit in the region of 3.2 billion euros, against the previous guidance in the region of 4 billion euros.

Volkswagen AG now expects the net cash flow of the automotive division to reach a figure of around 2 billion euros versus previous guidance of 2.5 to 4.5 billion euros. This forecast includes the assumption of 3.5 billion euros as expenses for merger and acquisition activities. Of this, approximately 2 billion euros is attributable to expenses in connection with the planned joint venture with Rivian, the company said.

There are quite a few auto ancillary companies that are export-oriented and have exposure to global original equipment manufacturers. Here is a look at the most affected companies that have exposure, especially to Volkswagen Group.

Samvardhana Motherson International Ltd.

• Volkswagen forms 9% of revenues; this forms an impact of roughly Rs 8,800 crore, according to its presentation in the fourth quarter of fiscal 2024.

• Audi, another Volkswagen Group entity, also formed 9% of the fiscal 2024 revenues.

• BMW, which earlier cut its guidance for vehicle sales, formed 5% of fiscal 2024 revenues, roughly Rs 4,900 crore.

Endurance Tech Ltd.

• According to Bloomberg, total relationship value with Volkswagen Group is Rs 695 crore.

• Total relationship value indicates the sales of products between the two entities.

• This formed roughly 6.5% of the fiscal 2024 revenues.

Ceat, Suprajit Engineering

• According to Bloomberg, Ceat's total relationship value is Rs 504 crore, while Suprajit Engineering's is Rs 95 crore.

• Volkwagen formed roughly 4.2% of Ceat's fiscal 2024 revenue.

• While it formed 3.2% of Suprajit Engineering's fiscal 2024 revenue.