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A Look at Volkswagen's Delivery Updates and Investment Plans

Zacks Equity Research
·3 min read

The coronavirus pandemic has hit the global auto market hard. After achieving record-breaking sales in 2019, Volkswagen’s VWAGY vehicle deliveries were adversely affected by COVID-19-led sluggish demand.

During the January-August 2020 period, sales of commercial vehicles and volume brands witnessed a greater decline than premium segments. Deliveries of volume brands and trucks/buses fell 22.9% and 31.8% year over year, respectively, during the first eight months of 2020. In contrast, sales of Porsche and luxury brands contracted 5.6% year over year during the same time period. Sales of the premium group led by Audi were down 16% year over year. Notably, Audi was the most successful premium brand of Germany on the basis of electric and hybrid sales for first-half 2020.

Region wise, Volkswagen’s sales in China witnessed the smallest decrease in deliveries during the first eight months of 2020, as the country’s auto sector is witnessing a gradual rebound from the prolonged slump. Contrarily, sales in west Europe fell sharply by more than 30% year over year during the same time frame.

Volkswagen expects overall orders and deliveries for September to be higher year over year. On an encouraging note, it expects the upward trend to continue for the rest of the year. While the firm anticipates 2020 operating profit to be down year over year, it still remains confident of remaining in the black despite coronavirus challenges.

Volkswagen — whose peers include Daimler AG DDAIF and BMW AG BAMXF — remains committed to invest 33 billion euros in e-mobility by 2024. It also intends to spend around 14 billion euros in technology and autonomous driving. The plans are in sync with the firm’s objective to go carbon neutral by 2050.Notably, the company plans to invest 15 billion euros by 2024-end to increase electrification efforts in China. The auto biggie aims to develop 15 new electric or hybrid models in China by 2025.The EVs will be based on the MEB architecture at its two new dedicated modular electric drive matrix manufacturing facilities in China. The company has been collaborating with local battery suppliers in China to meet its future requirements.

Meanwhile, merger talks between Volkswagen’s truck arm Traton SE and Navistar NAV are also heating up. Notably, Traton already owns around 17% stake in Navistar. Recently, Traton boosted its offer to buy the rest of the Illinois-based truck maker to $43 per share from $35 offered in January 2020. While Navistar has rejected the bid citing it too low, it has said that the offer could be a starting point for exploring a possible transaction.Considering Volkswagen’s limited exposure in the North American truck industry, and Navistar’s strong footing in the region along with impressive dealership networks, it would make sense for the Germany-based auto giant to make every effort to purchase the remaining shares of Navistar and become its sole owner.

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Navistar International Corporation (NAV) : Free Stock Analysis Report
 
Daimler AG (DDAIF) : Free Stock Analysis Report
 
Bayerische Motoren Werke AG (BAMXF) : Free Stock Analysis Report
 
Volkswagen AG (VWAGY) : Free Stock Analysis Report
 
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Zacks Investment Research