Volkswagen’s share price is in freefall as its woes persist. This week the stock fell to EUR87.90, which is its lowest price since November 2020 and 50% below its peak in 2022.
There are still many challenges to overcome
Volkswagen, and other carmakers have had a tough year due to the increased competition and slipping demand in important markets such as China and Europe.
Ford and General Motors in the United States have fallen by half from their highs of 2022. Tesla, Rivian and Lucid Group, as well as other electric vehicle manufacturers, are also not faring very well. Meanwhile, Fisker, Mullen Automotive , is on life support.
Stellantis Renault and BMW in Europe have all dropped more than 30% since their highs for the year. In Japan, stocks like Toyota and Honda are also declining.
India is the only place where carmakers have done well this year. Companies like Tata Motors and Maruti Suzuki are up.
Volkswagen has made headlines this month when it announced that for the first in many years, they will be closing down locations in Germany. They cited falling sales as well as a need to increase efficiency.
Volkswagen’s biggest challenge is the fact that it has not had much success with its electric cars, while both its European and Chinese market are under constant pressure. Volkswagen also has to deal with the rising cost of energy and labor in Europe.
The competition is fierce from Chinese firms like Xpeng Nio BYD and Li Auto. As their domestic growth slows, these companies target the European market.
The earnings are declining
Volkswagen delivered over 2,24 million units to its customers in the second half of the year, a drop of 3.8% from the previous quarter.
The company’s revenues increased by 4%, to EUR83.3 Billion. This was due to higher prices for vehicles. However, its net income after taxes fell to EUR3.6 Billion. In spite of the fact that its employee count continued to decline, this decrease occurred. Its net cash flow was over EUR2.4 billion.
Analysts think that Volkswagen must succeed in its turnaround strategy. This will prove to be a difficult situation. The government and the union will make it difficult to close down any locations in Germany.
Volkswagen’s commitment to be all-electric by 2035 is another challenge. This goal seems impossible due to the lackluster demand on key markets such as the United States.
The company has taken several steps to reach its EV goals. It has invested more than $5 billion into Rivian in the US. Rivian is the manufacturer of popular pickup trucks. This was a large investment. It represented almost half of the total value of the company.
Analysts warn that Rivian’s cash-burning track record could be unsustainable in the future. Analysts warn that Rivian could go bankrupt ,.
The company is most important for investing in battery technology. It has taken a large stake in QuantumScape – a firm that works on solid state batteries.
Volkswagen also made an investment in Xpeng – a Chinese EV manufacturer. This investment is intended to increase market share for Volkswagen in countries such as the US and China. These investments are yet to bear any fruit on the long-term.
Volkswagen still has much work to do in order to return to its former glory, as the auto industry undergoes a change of normal.
Volkswagen share price analysis
On the chart for the week, the Volkswagen share price reached a high of EUR173.10 at the end of 2021. It then fell to EUR87.90 as the company’s woes grew.
Since July 2022 the stock price has not fallen below this support level. This means that it’s a very strong point. The stock has fallen below both the 100-week and 50-week moving medians.
The Relative Strength Index has also shifted downwards. The VW stock will therefore move in a downward direction, particularly if the price drops below EUR90.72, which is the important support level. This will cause it to fall down to EUR77.90 which is the key support level at 78.6%.
The ICD published the first version of this post: Volkswagen shares are at an all-or-nothing level
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