IS IT PROFITABLE TO BUY VOLKSWAGEN SHARES IN 2024?
Volkswagen, a German automotive giant, has diversified its operations into the financial sector, providing a full range of financial services including vehicle financing, leasing, insurance and mobility solutions.
Volkswagen Financial Services AG, a subsidiary of Volkswagen AG, is responsible for these services, operating in more than 50 countries and managing assets worth billions of euros.
This expansion in the financial sector not only supports vehicle sales, but also generates substantial revenue independent of direct car sales.
Volkswagen’s focus on financial services has become an integral part of its business strategy, especially in a context where the automotive industry is facing challenges such as the transition to electric mobility and fluctuations in market demand.
Through its financial services, Volkswagen is able to offer its customers flexible and attractive options, improving accessibility and user experience.
In addition, these services allow the company to strengthen its relationship with customers in the long term and capture added value beyond the main product.
HISTORY AND FOUNDATION
Volkswagen, one of the world’s most iconic automotive brands, has a history dating back to the 1930s in Germany.
The company was founded on 28 May 1937 as the Volkswagens mbH” by the German Labour Front under the Nazi regime, with the mission of manufacturing a “people’s car” (Volkswagen in German).
This vehicle was to be accessible to average German families, and the design of the first model was entrusted to Ferdinand Porsche, a visionary automotive engineer.
The result was the Volkswagen Type 1, popularly known as the “Beetle”.
With its compact and efficient design, the Beetle became one of the best-selling cars of all time. However, mass production was delayed due to World War II, during which the factory was turned to military production.
After the end of the war, Volkswagen’s Wolfsburg plant was revitalized under British administration and subsequently returned to German control.
In the 1950s and 1960s, the Beetle gained global popularity, symbolizing the efficiency and reliability of German engineering.
Over the next few decades, Volkswagen expanded, acquiring other brands such as Audi, SEAT, and Škoda, and diversified its production with a variety of models and technologies.
Today, Volkswagen AG is one of the world’s largest automotive conglomerates, with a significant presence in all segments of the automotive market and a strong focus on innovation and sustainability, especially in the development of electric vehicles.
VOLKSWAGEN’S FINANCIAL PERFORMANCE
Since its founding in 1937, Volkswagen has experienced remarkable financial growth, becoming one of the largest automotive conglomerates in the world.
In its early years, Volkswagen’s production was focused on the famous Beetle, which contributed significantly to its revenue and established a solid financial foundation.
However, World War II disrupted civilian production, focusing on military vehicles.
After the war, the recovery was rapid, and in the 50s and 60s, exports of the Beetle boosted Volkswagen’s financial growth, consolidating its position in international markets.
The 1970s marked a key diversification with the introduction of new models such as the Golf, which became another financial pillar for the company.
In the 1980s and 1990s, Volkswagen expanded its portfolio by acquiring brands such as Audi, SEAT, and Škoda, which diversified its revenues and mitigated risks associated with dependence on a single market or model.
This expansion helped Volkswagen maintain a robust financial position despite fluctuations in the global automotive market.
The 21st century brought challenges and opportunities, including the emissions scandal in 2015, which had a temporary negative impact on its finances and reputation.
Despite this, Volkswagen showed resilience, investing heavily in innovation and electric mobility, with ambitious plans to lead the EV market.
Today, Volkswagen AG remains a financial leader in the automotive industry, with annual revenues exceeding €250 billion, a strong portfolio of brands, and a strategic focus on sustainability and technological innovation.
PERFORMANCE AND TECHNICAL ANALYSIS OF VOLKSWAGEN SHARES ON THE STOCK EXCHANGE
Analysing the behaviour of Volkswagen shares throughout history, it can be said that this company has emerged very well positioned from many of the regional and global crises that it has had to go through in more than 80 years of existence.
For example, by 2008 its shares went from having a value of 210 euros to 945 euros; even, at times it managed to pass the barrier of 1000 euros.
In the case of Volkswagen shares, the increase in short positions, which on October 26, 2021 exceeded 15%, together with the increase in their price, caused a phenomenon known as “super short squeeze” or extreme squeeze of short positions.
Shorting, by definition, involves selling an asset you don’t own, with the expectation of buying it back at a lower price.
The significant advance in the share price forced the liquidation of short positions, forcing investors who had sold Volkswagen shares without owning them to acquire them on the market at high prices to meet their sales commitments.
This event triggered a chain effect, where the increase in Volkswagen’s share price increased its weighting in various indices, such as the DAX.
As a result, investment funds that track the performance of these indices were forced to buy Volkswagen shares at high prices to maintain the composition of their portfolios.
Despite the incident, Volkswagen shares have shown a somewhat upward trend in the last 20 years, fluctuating in the first years between 25 and 65 dollars, until the rally that began in 2006.
TECHNICAL ANALYSIS OF THE STOCKS 2020 – 2022
The technical analysis of Volkswagen’s stock market performance between 2020 and 2022 reveals a period of significant volatility, influenced by macroeconomic factors and company-specific events.
In 2020, Volkswagen’s shares, like many others, were severely impacted by the COVID-19 pandemic.
In March 2020, the share price fell sharply, reaching a low of around €90 due to factory closures and declining global demand.
However, from the second quarter of 2020, a gradual recovery was observed, driven by the reopening of the economy and the launch of new electric models as part of Volkswagen’s strategy towards sustainable mobility.
In 2021, Volkswagen shares saw a notable increase, reaching a peak in March of around €250.
This rally was largely driven by market enthusiasm towards Volkswagen’s transition to electric vehicles, especially with the launch of the ID.4, and the company’s ambitious plans to become a global leader in this segment.
Comparisons with Tesla and expectations that Volkswagen could replicate its success in the EV market generated significant optimism among investors.
In 2021, the stock price began to stabilize and retreat afterwards, due to global supply chain difficulties and semiconductor shortages that affected production.
In 2022, the behavior of Volkswagen shares was marked by continuous fluctuations.
At the start of the year, the stock was trading around €170 but faced downward pressures due to persistent supply chain disruptions and global macroeconomic uncertainty, including inflation and geopolitical tensions.
VOLKSWAGEN AND THE EVENTS OF 2015
In 2015, Volkswagen was embroiled in a major scandal when U.S. environmental authorities discovered that the company had installed software in its diesel vehicles to manipulate emissions test results.
This software, known as a “defeat device,” allowed vehicles to meet emissions standards during testing, but under normal driving conditions, vehicles emitted levels of nitrogen oxides (NOx) up to 40 times higher than those allowed by law.
The discovery of this practice, which affected approximately 11 million vehicles worldwide, sparked a series of investigations and legal action against Volkswagen.
In the United States, the Environmental Protection Agency (EPA) and the Department of Justice filed charges against the company for violating the Clean Air Act.
In 2016, Volkswagen agreed to a $14.7 billion settlement with U.S. authorities, which included compensation to owners of affected vehicles, buyback of them and a fund to mitigate the environmental effects of excess emissions.
In addition to the financial penalty, the scandal had significant repercussions on Volkswagen’s reputation, leading to changes in the company’s senior management and a thorough review of its internal policies and procedures.
This incident, known as “Dieselgate”, highlighted the importance of transparency and compliance with environmental regulations in the automotive industry, and marked a turning point for Volkswagen, which has since focused its efforts on electrification and sustainability.
VOLKSWAGEN’S MAIN COMPETITORS
Volkswagen is facing fierce competition in the global auto industry, competing with several giants ranging from traditional brands to new players in the electric vehicle market.
Among its main competitors are:
1. TOYOTA MOTOR CORPORATION
Toyota Motor Corporation, one of the world’s largest automakers, has a strong economic performance characterized by its robust financial structure and adaptability.
In fiscal 2023, Toyota reported net income of about 30 trillion yen (about $270 billion), with a net profit of about 2.5 trillion yen (about $22 billion).
This performance reflects Toyota’s resilience in a challenging environment marked by the COVID-19 pandemic, supply chain disruptions and semiconductor shortages.
Toyota has maintained a strong balance sheet, with positive cash flow and a low debt-to-equity ratio, allowing it to invest heavily in research and development.
In 2023, it allocated more than 1 trillion yen (about 9 billion U.S. dollars) to R+D, focusing on sustainable mobility technologies such as electric, hybrid, and hydrogen vehicles.
Toyota’s strategic focus on diversifying its product portfolio and its leadership in hybrid technology, with iconic models such as the Prius, has been crucial to its success.
Its expansion into emerging markets and its strong global production and distribution network have strengthened its competitive position.
Despite macroeconomic challenges and market fluctuations, Toyota continues to demonstrate an outstanding ability to generate shareholder value, maintaining its leadership in the global automotive industry and adapting to sustainability and electrification trends in the sector.
2. GENERAL MOTORS
General Motors (GM), one of the leading U.S. automakers, has demonstrated a remarkable ability to maintain its financial stability and adapt to market changes.
In fiscal 2023, GM reported net income of approximately $156 billion and net profit of about $9.9 billion.
These results reflect a solid recovery after the disruptions caused by the COVID-19 pandemic and the semiconductor shortage.
GM has maintained a robust balance sheet, with a manageable debt-to-equity ratio and positive operating cash flow, allowing it to continue investing in innovation and expansion.
In 2023, GM allocated close to $10 billion to research and development, with a significant focus on the transition to electric and autonomous vehicles.
Its Ultium platform, which underpins its EV lineup, is a cornerstone in its electrification strategy.
The company has launched key models such as the Chevrolet Bolt EV and GMC Hummer EV, and has announced ambitious plans to phase out internal combustion engine vehicles by 2035.
In addition, GM has established strategic alliances, such as collaborating with Honda to develop electric and autonomous vehicles.
The North American market remains its biggest source of revenue, but GM is also expanding its presence in China, the world’s largest auto market.
Despite macroeconomic challenges and increasing competition in the electric vehicle sector, GM continues to position itself as an innovative leader, with a strong commitment to sustainability and future mobility.
3. NISSAN MOTOR CO., LTD
Nissan Motor Co., Ltd., a major Japanese automaker has faced economic challenges in recent years but is working to regain its position in the global market.
In fiscal 2023, Nissan reported net income of about 8.7 trillion yen (about $78 billion) and a net profit of about 230 billion yen (about $2.1 billion).
These results reflect a significant improvement compared to previous years, attributed to restructuring efforts and the gradual recovery of demand in some key markets.
Nissan has sought to improve its profitability by optimizing its cost structure and streamlining its product portfolio.
The company has invested in the research and development of electric and autonomous vehicle technologies to stay competitive in an ever-evolving market.
However, Nissan still faces significant challenges, including intense competition in key markets such as the United States and China, as well as the need to adapt to electrification and sustainable mobility trends.
The company continues to implement measures to improve its profitability and strengthen its position in the global market, but its future success will depend on its ability to effectively execute its strategy and keep up with changes in the automotive industry.
VOLKSWAGEN’S PERFORMANCE IN THE LAST FISCAL YEAR
In terms of revenue, Volkswagen reported about 260,000 million euros, a slight increase compared to the previous fiscal year.
This growth is mainly attributed to sustained demand for vehicles in key markets such as Europe, China and North America.
In terms of profits, Volkswagen recorded a net profit of around 11 billion euros, marking a significant increase compared to the previous year.
This increase was partly due to the cost control measures implemented by the company and better supply chain management.
Volkswagen continued to invest heavily in research and development, especially in electric vehicles and autonomous driving technologies.
The company launched several new and updated models in its EV lineup, such as the ID.4 and ID. Buzz, as part of its electrification strategy.
VOLKSWAGEN SHARE DIVIDENDS
Volkswagen AG’s dividend allocation during the 2023 fiscal year is a testament to the company’s commitment to its shareholders and its focus on sustainable value generation.
The ordinary dividend, set at €9.00 per share, reflects recognition to shareholders for their continued support and confidence in the company’s standard operating performance, based on its ability to maintain stable growth and consistent profitability.
On the other hand, the extraordinary dividend of €18.76 per share, announced and paid as a result of Volkswagen’s strong financial results in 2023, highlights the company’s exceptional achievements and ability to adapt and thrive in a dynamic and challenging business environment.
This balanced and strategically planned dividend distribution reinforces Volkswagen’s position as a leader in the automotive industry and underlines its commitment to creating long-term value for all its shareholders.
In addition, it demonstrates the company’s ability to generate strong cash flows and maintain prudent financial management, contributing to its stability and continued growth in the market.
CONSIDERACIONES INTERNAS
- Financial outlook: Volkswagen has maintained strong profitability in recent years, projecting a profit margin on sales that is expected to reach between 9% and 11% by 2030.
- Commitment to electrification: The company is making significant investments in the development of electric vehicles, putting it in an advantageous position to capitalize on the growth of the sustainable vehicle market.
- Regional strategic focus: This company is implementing specific strategies to strengthen its position in key markets such as China and North America, which could boost its future growth.
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EXTERNAL CONSIDERATIONS
- Global Economic Conditions: The current global economic uncertainty could have a negative impact on the automotive industry as a whole.
- Intense competition: The automotive industry faces fierce competition, with the entry of new competitors and the constant launch of new products by established companies.
- Government regulations: Governments around the world are implementing stricter regulations on greenhouse gas emissions, which could increase production costs for Volkswagen.
HOW TO BUY VOLKSWAGEN SHARES?
To buy Volkswagen shares you can follow these steps:
- Open an investment account: First, you’ll need to open an investment account with a broker or online trading platform. You can choose between traditional brokers or online platforms that offer stock buying and selling services.
- Research and choose a broker: Research different brokers and choose one that suits your needs and preferences. It considers factors such as commissions, ease of use of the platform, additional services offered, and the broker’s reputation.
- Conduct a market analysis: Before buying Volkswagen shares, conduct a market analysis to better understand the company’s performance, financial situation, recent news, and trends in the automotive sector.
- Place your buy order: Once you have selected a broker ready to buy shares, log in to your investment account and place a buy order specifying the number of Volkswagen shares you want to buy and the price you are willing to buy.
- Monitor your investments: After buying stocks, regularly monitor the performance of your investments and adjust your strategy as needed.
VOLKSWAGEN’S GLOBAL EXPANSION STRATEGIES
They have focused on strengthening their presence in key markets and diversifying their product offerings to suit regional needs.
One of the main strategies has been geographical expansion into emerging markets, such as China, India and Brazil, where Volkswagen has established strategic alliances and made significant investments to capture the growth in vehicle demand.
In China, the world’s largest auto market, Volkswagen has been a major player for decades. The company has formed joint ventures with local partners, such as SAIC Motor and FAW Group, to produce and sell a wide range of vehicles that suit the preferences of the Chinese market.
In addition, Volkswagen has sought to expand its presence in North America, a highly competitive and demanding market.
Through its core brand and luxury brands such as Audi and Porsche, the company has introduced models tailored to the U.S. market and invested in production and distribution infrastructure to enhance its position in the region.
Another important strategy has been the expansion in the segment of electric vehicles and sustainable mobility technologies.
Volkswagen has announced ambitious plans to launch a wide range of electric vehicles in the coming years and has invested in charging infrastructure and the construction of factories dedicated to the production of electric vehicles.
CHALLENGES AND OPPORTUNITIES FOR VOLKSWAGEN
Volkswagen faces a number of challenges and opportunities in an ever-evolving automotive environment.
Challenges include intense competition in the global market, especially in the EV segment, where new players are entering and consumer expectations are changing rapidly.
Regulatory pressure to reduce emissions and meet stricter energy efficiency standards represents a significant challenge, especially in the context of the transition to sustainable mobility.
However, these challenges also present opportunities for Volkswagen.
The company has the opportunity to lead the transition to electric vehicles and consolidate its position as a leader in sustainable mobility.
By investing in innovative technologies and expanding its range of electric vehicles, Volkswagen is able to capture a growing share of the market and meet the demand of environmentally conscious consumers.
Volkswagen can leverage its experience and reputation to diversify its mobility services, exploring business models such as shared mobility and autonomous transportation services.
By addressing these challenges with strategic vision, Volkswagen can turn them into opportunities to strengthen its market position and maintain its relevance in the automotive industry.
FUTURE OF VOLKSWAGEN
Volkswagen’s future is marked by a significant transformation towards electrification, digitalization and sustainability.
As a leader in the automotive industry, Volkswagen is taking a proactive approach to addressing the emerging challenges and opportunities presented by the global automotive landscape.
Electrification is positioned as a cornerstone in Volkswagen’s future.
The company is making massive investments in the development and production of electric vehicles, with the aim of offering a wide range of electric models that meet the demands of environmentally conscious consumers and increasingly stringent government regulations on emissions.
Volkswagen is committed to its “Roadmap E” initiative, which seeks to electrify its entire model range by 2030, reflecting its determination to lead the transition to electric mobility.
Apart from electrification, digitalization plays a key role in Volkswagen’s future.
The company is integrating innovative technologies such as artificial intelligence, machine learning, and connectivity into its vehicles to improve user experience, safety, and operational efficiency.
Volkswagen is developing advanced driver assistance systems and autonomous driving functions to offer safer and more convenient mobility.
Sustainability is another crucial aspect in Volkswagen’s future. The company is committed to reducing its carbon footprint and implementing responsible business practices throughout its value chain.
Volkswagen is investing in more sustainable manufacturing technologies, such as producing electric vehicle batteries with renewable energy, and is developing sustainable urban mobility solutions to address environmental and social challenges.
