FRANKFURT – German auto giant Volkswagen on March 13 reported a forecast-beating rise in profits for 2023 as vehicle deliveries rebounded but warned of slower sales growth in 2024, sending its shares down.

The 12 per cent increase in deliveries marked a turnaround following three straight years in decline linked to production disruptions caused by shortages of key components.

Net profits rose 13.1 per cent from 2022 to €17.9 billion (S$26.1 billion) in 2023. Sales meanwhile grew more than 15 per cent to €322.3 billion.

The 10-brand group – which includes Audi, Porsche and Skoda – saw particularly strong sales in Europe and North America.

In China, sales grew modestly but at a slower than in 2023, offering the latest evidence that Volkswagen is losing ground in its most important market.

Volkswagen has fallen behind domestic competitors in China, losing its title as the best-selling auto brand to BYD.

The auto giant’s outlook for 2024 was also very subdued. It expects vehicle deliveries to advance in 2024, forecasting a modest increase of up to 3 per cent due to tougher international competition and potential supply chain problems.

Sales growth is similarly expected to come in at 5 per cent, well down on 2023.

“The persistently high inflation in major economic regions and the resulting restrictive monetary policy measures taken by central banks are expected to dampen consumer demand,” it warned.

“Continuing geopolitical tensions and conflicts are weighing on growth prospects; risks are associated in particular with the Russia-Ukraine conflict and the confrontations in the Middle East.”

Stalling electric shift

Volkswagen also warned there could be decreases in demand, “possibly exacerbated by media reports or insufficient communication”.

The carmaker came under fresh pressure in February over its operations in China’s troubled Xinjiang region, after the Handelsblatt financial daily reported that forced labour may have been used to build a test track there in 2019.

Following the report, Volkswagen said it was in talks with its Chinese joint-venture partner SAIC “about the future direction of business activities in Xinjiang”.

Volkswagen chief executive Oliver Blume said on March 13 that the company takes such allegations “very seriously” but “so far, we have not been able to confirm the information” provided.

In terms of the operation’s future, Mr Blume insisted Volkswagen had a “responsibility” towards the employees in the joint venture in Xinjiang.

Volkswagen in 2023 singled out China and the United States as key markets for its future growth, and it is also looking to increase profit margins.

Volkswagen sold 771,000 battery-powered cars in 2023, 35 per cent more than the previous year, but still only 8.3 per cent of the group’s total sales.

The carmaker has ploughed huge sums into producing more electric vehicles but there have been concerns that this shift is stalling, amid low demand and a weak global economy.

In recent months, Volkswagen has flagged plans to reduce its workforce and also unveiled a €10 billion savings plan as it seeks to boost profitability and reboot the faltering electric shift.

Its profit margins are languishing at 7 per cent, below its long-term target of between 9 per cent and 11 per cent. AFP