Volkswagen Car Deliveries Fall as Industry Challenges Mount — Update
By Dominic Chopping
Volkswagen delivered fewer cars in the third quarter as the automaker navigates an increasingly challenging market hit by a price war in China and high domestic production costs.
"The competitive situation in China is particularly intense, which is the main reason for the global decline in our deliveries," Volkswagen Executive Committee member Marco Schubert said.
Volkswagen's car deliveries overall fell 7.1% on year to 2.2 million in the quarter, while deliveries in China fell 15%. The company blamed the high price discounts offered by competitors in the region, the majority of which are even launching new models at aggressive price points to gain market share.
The German car maker has avoided engaging in these tactics, preferring to stick to its pricing model to ensure it brings in the profit needed for technology investments.
Rivals BMW and Mercedes-Benz also said this week that car sales had been held back by a challenging Chinese market, with soft demand and strong pricing competition.
Volkswagen has implemented cost-saving measures to boost the competitiveness of its fully-electric vehicles in China, and it said Friday that its efforts helped deliveries of its all-electric vehicles in the country rise 5.2% in the quarter.
But domestic pricing pressure has also led the company to consider closing German factories as part of a cost-cutting and restructuring push aimed at keeping the company competitive as labor and production costs weigh.
"A better cost base, particularly in Germany, is essential to remain successful in this environment," Schubert said Friday.
European manufacturers including Volkswagen, BMW, Mercedes-Benz, Stellantis and Aston Martin have all cut full-year profitability guidance in recent weeks, with most of them citing weak demand in China for their dampened expectations.
They are also facing the prospect of an escalating trade war with China, after the EU last week confirmed plans to move ahead with tariffs of up to 45% on electric vehicles made in China to counter alleged subsidies granted by the Chinese government. Many European manufacturers have expressed concern over retaliation and Beijing has said it will continue to study measures such as raising tariffs on imported large-engine vehicles.
Volkswagen, which in addition to its namesake brand owns Skoda, Audi, Bentley and Lamborghini among others, expects to deliver about 9 million vehicles to customers this year. That is below the 9.24 million vehicles delivered in 2023. In the nine months to the end of September this year it had delivered 6.5 million.
Rating agency Moody's Ratings on Friday downgraded Volkswagen's outlook to negative from stable, prompted by the deterioration of the auto market.
The negative outlook is based on risks related to a worsening market environment and the carmaker's recent weakening trend in profit margin and free cash flow generation, Moody's said.
Write to Dominic Chopping at dominic.chopping@wsj.com