Demand for automobiles is sluggish, and Volkswagen (VWAGY.US) once again lowered its annual forecast

The Zhitong Finance App learned that the pressure facing Volkswagen (VWAGY.US) is gradually increasing. Europe's largest carmaker lowered its annual forecast for the second time in less than three months on Friday as the passenger car division's performance was weaker than expected. The company lowered its global delivery forecast to around 9 million vehicles, lower than the previous forecast of an increase of up to 3% from 9.24 million units in 2023, while sales are expected to drop 0.7% to 320 billion euros (US$356.7 billion), with an initial increase of up to 5%. Volkswagen currently expects a profit margin of about 5.6% in 2024, lower than the previous 6.5% -7%, and also lower than LSEG's 6.5% forecast.

Volkswagen said it lowered its outlook “in view of the challenging market environment and developments that did not meet initial expectations, particularly for Volkswagen passenger cars, Volkswagen commercial vehicles and technology parts brands.” After the news was announced, Volkswagen jumped 1.7% in the US stock market for a while.

Earlier this month, due to weak demand in China, the world's largest automobile market, Mercedes-Benz and BMW both lowered their annual forecasts. The German car manufacturer, which has a majority stake in Porsche (Porsche) and truck giant Traton, lowered its expectations this time.

Two days ago, Volkswagen and Germany's most powerful trade union, IG Metall (IG Metall) began key negotiations on pay and job protection issues. This historic conflict may lead to the closure of a factory in Germany for the first time in Volkswagen's history.

Porsche Porsche, the holding company of Porsche and the Piech (Piech) family, holds most of the popular voting rights and is the largest single shareholder of the automaker. After Volkswagen's rating was downgraded, the holding company Porsche also lowered its rating outlook.

The weakening global economy has hit Germany's export-oriented economy, while severe shortages of skilled labor, high energy prices, and lower-cost Asian competitors have put pressure on local industrial giants such as Thyssenkrupp (Thyssenkrupp) and BASF (BASF).

These issues also challenge Germany's tried and tested model of consensus-building with strong trade unions, which is seen as an advantage when demand grows, but becomes a burden when costs rise above wage expectations.

The fate of the automobile industry and demand pressure from the Chinese market have become a global industry problem. This industry has hit European automotive elites who have been working hard to keep their factories running at full capacity.

Volkswagen is due to announce its third-quarter results on October 30. The company said it currently expects its auto division's net cash flow to be around 2 billion euros, lower than the previous 2.5 billion to 4.5 billion euros.