Volksagen (VWAGY) to Bolster ID.Buzz Capacity on Demand Surge

Zacks Equity Research
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Volkswagen AG’s VWAGY newly launched all-electric van, the ID.Buzz, witnesses a tremendous demand wave, with the current preorder figure reaching 12,500 from 10,000 in a month. Interestingly, more than 6,000 preorders, almost half the total, are for the ID.Buzz Cargo.

For a recently placed order, the delivery is expected at the end of the first quarter of 2023, in March or April. For the earliest reservation holders, deliveries will start from November 2022.

In March, Volkswagen revealed the production version of the much-anticipated ID.Buzz. It is a redesigned electric rendition of the iconic VW microbus, the T1, popular in the 1950s.

Amid the raging popularity, in June, the company temporarily halted production at the Hannover plant in Germany, where the vehicle is manufactured. The decision came on the grounds of battery quality issues. Faulty cells and modules of batteries sourced from a new supplier compromised the quality of the premium. However, within a short span, it restarted production.

In August, the auto king revealed that it had received more than 10,000 preorders which made the van almost sold out for the year as the company plans to produce only 15,000 units in 2022.

To cater to the demand, Volkswagen has planned a ramp-up of production at the Hanover plant. The facility presently builds 100 ID. Buzz vehicles a day and efforts are underway to take the figure to 200 units per day by the end of the year. The real output increase will be visible in 2023.

It is also in Volkswagen’s cards to expand and capture markets in Asia, such as Japan, China, Thailand and Malaysia. Therefore, the Hanover plant will not likely be the only one making the ID. Buzz. The Poznan plant in Poland may also get the ID. Buzz.

Earlier, the auto magnate also planned to increase annual production to 60,000 units next year and eventually to 130,000 units per year when the EV is launched in North America, likely in 2024.

In another important development, the ID.Buzz will debut Magna’s MGA new rear thermoplastic swing doors. Magna’s latest innovative doors contain recycled materials and are lightweight compared to conventional steel offerings. This will reduce the vehicle’s overall weight, optimize the range and will demand less effort from customers while opening the doors.

Thermoplastic resin material allows vehicle designers to bring in more styling freedom, giving leeway for brand differentiation. It also creates a cleaner appearance, improves vehicle aerodynamics and is an economical option.

With the ID. Buzz, the German automaker added another model to its ID. Family, comprising the ID.3, ID.4 and ID.5 in Europe. The addition of the vehicle is part of its Accelarate strategy. The strategy, launched in August, projects that by 2030 Volkswagen plans to generate 70% of its sales in Europe from all-electric vehicles. The company also projects 100% of its new vehicles in major markets to be carbon-free by 2040. These targets are part of Volkswagen’s broader goal to be fully carbon neutral by 2050. The vehicle is carbon-neutral on handover to the customers and complements the company’s vision of carbon-neutrality.

The ID.Buzz will likely solidify Volkswagen’s long-standing reputation and expertise in the EV space.

Shares of Volkswagen have declined 33.1% in the past year compared with its industry’s 33.6% fall.

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Zacks Rank & Key Picks

VWAGY carries a Zacks Rank #3 (Hold), currently.

Some of the better-ranked players in the auto space include Yamaha Motor Co. YAMHF, sporting a Zacks Rank #1 (Strong Buy) and BorgWarner BWA,carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Yamaha has an expected earnings growth rate of 1% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 11.6% upward in the past 30 days.

Yamaha’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. YAMHF pulled off a trailing four-quarter earnings surprise of 47.95%, on average. The stock has declined 26.6% over the past year.

BorgWarner has an expected earnings rate of 2.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been kept constant in the past 30 days.

BorgWarner’s earnings beat the Zacks growth Consensus Estimate in all the trailing four quarters. BWA pulled off a trailing four-quarter earnings surprise of 29.45%, on average. The stock has declined 10.4% in the past year.


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