Electromobility and war in Ukraine

With the current plan and future announced projects, we are fulfilling our role in the overall transformation of the concern to electromobility, while helping to gain the economic basis to handle this transformation.[1]

The armed conflict in Ukraine contributed to the ongoing shortage of semiconductors at the beginning of the year. The Russian military invasion not only caused supply chain disruptions that led to many production cuts, but also disrupted global energy markets and caused the largest increase in energy prices in decades. Despite the mentioned events, the company achieved even better economic results than in 2021.

Despite the year-on-year decrease in the total number of cars and the end of transmission production, the company's turnover and profit increased slightly.

This is due to the further optimization of cost structures, as well as the current model structure of manufactured vehicles within the Bratislava portfolio.
According to the company's management, preparations in Bratislava for the serial production of the Volkswagen Passat and Škoda Superb models are going according to plan, despite extremely difficult conditions.

Visions are also challenges

While Volkswagen's commitment to research and development is a strength, it also presents a challenge in terms of high costs.

The global production of the VW concern in the fiscal year 2022 increased by 5.2% compared to the previous year to 8.72 million vehicles produced. Productivity also increased year-on-year by 1.2%.[2]  
In their own words, the German automaker is on track to overtake Tesla in BEV (battery electric vehicle) volume in 2024, as global demand for BEVs is set to more than double by 2025.

VW has outlined a strategy that includes investing 180 billion euros ($193 billion) over five years in areas including battery and raw material production, as it seeks to lower EV production costs and outpace Tesla and other rivals by increasing its market share. [3]

Quality costs something

The company must constantly invest large amounts of money to remain competitive, especially in electric vehicles and autonomous driving areas.

Volkswagen further identified the most significant risks within its QRP process (Quarterly Risk Process) especially in volatile procurement markets, primarily in connection with the availability of semiconductors, as well as in cyber security and new regulatory requirements for IT, as well as in quality issues.[4]

Company management further notes that demand for resources, possible market speculation and current trends in the automotive industry, such as the increasing share of electrified vehicles, may affect the availability and prices of certain raw materials. Raw material and demand trends are continuously analyzed and assessed on an interdisciplinary basis so that potential 'funnels' can be acted upon at an early stage. [5]

Volkswagen share price development over the past 5 years. Source: Tradingview.com *

Conclusion:

Volkswagen is known for its remarkable quality of pre- and post-sales service, which is one of their main sources of competitive advantage. However, significant progress in the field of electromobility must be added to this traditional advantage if the automaker wants to keep up with the tough competition from the American Tesla and the Chinese Nio or BYD. The results for the extremely challenging past period confirm that Volkswagen has the necessary know-how and strategy to succeed in global competition. [1]

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Adam Austera, chief analyst at Ozios

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or are based on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied in any forward-looking statements.

[1] https://sk.volkswagen.sk/content/dam/companies/sk_vw_slovakia/podnik/vyrocna_sprava_2022.pdf

[2] https://sk.volkswagen.sk/en/company/facts-and-figures.html

[3] https://www.theverge.com/2023/3/16/23643047/vw-id-2-all-ev-price-photo-specs

[4] https://annualreport2021.volkswagenag.com/group-management-report/report-on-risks-and-opportunities/risks-and-opportunities/operational-risks-and-opportunities.html

[5] https://annualreport2021.volkswagenag.com/group-management-report/report-on-risks-and-opportunities/risks-and-opportunities/operational-risks-and-opportunities.html