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== Earnings Call Summary ==
== Earnings Call Summary ==
Video: [https://www.volkswagen-group.com/en/publications/presentations/volkswagen-group-presentation-q1-2024-investor-analyst-and-media-call-2704 Volkswagen Analyst and Media Call] | [https://seekingalpha.com/article/4687488-volkswagen-ag-vwagy-q1-2024-earnings-call-transcript Transcript: Volkswagen Analyst and Media Call]
Here is the summary of Volkswagen's analyst and media conference call<ref>https://seekingalpha.com/article/4687488-volkswagen-ag-vwagy-q1-2024-earnings-call-transcript</ref>;
=== Outlook ===
* Volkswagen expects performance in the coming quarters to be supported by new and upcoming models such as the ID.7, Macan Electric and the Q6 e-tron.
*'''They said they are now in the process of ramping up the supply situation at Audi and performance should improve already in Q2.'''
* Efficiency programs initiated at the brand core in 2023 will will unfold its full impact in 2024.
* 2024 will be the big year for R&D spend as already seen in Q1 (factored in 2024 outlook).
* Volkswagen expects model and brand mix to improve in the coming months.
* They expect pricing to continue to be slightly supportive, "benefiting from rollover effect from last year's price increases but burdened by higher temporary sales promotions for our electric vehicles."
* Expect product costs to provide tailwind for the rest of the year (material cost to contribute 1 billion euros tailwind going forward).
* They said they review the global BEV sales expectations continuously and are prepared to adjust capacity and capex planning in Powerco accordingly, if necessary.
*'''Volkswagen expect an improvement in margin and financial performance already in Q2 and stronger earnings trajectory in the rest of the year.'''
* They will book a severance expense of 900 million euros in Q2 which will be compensated in the full year. They will make provision in Q2 and cash out will be in Q3.
* Their target for net cash flow in 2024 is 4.5 to 6.5 billion euros. About 6 billion cash out flow will go to the ramp up of the battery business, 4 billion out of that is R&D and Capex and 2 billion is for additional M&A (more control of the value chains eg raw materials such as cobalt, nickel and lithium.
*'''In Q2, they expect margin to be inline with their full-year guidance, but the €900 million severance cost might lead to a burden in that respect. However, they expect to compensate in the remainder of the year.'''
* They expect significant improvement in Audi  margin in Q3 going forward.
* Wages were not increased in Q1 2023, hence Q2 2024 going forward will benefit from increases in the other quarters last year (n strong comps as a result of that).
* They expect order intake to increase throughout the year since some important models such as those of the Tiguan Brand were not available for order in Q1. They also expect BEV share to increase though they are margin dilutive.
* Powerco losses will increase with the ramp-up (that's clear until 2025).
* They expect CARIAD sales revenue to improve with the ramp-up of new models such as E Macan, ID.Tourer, Q6 e-tron.
* Their long-term target for automotive net liquidity is more than 10% of sales.
* They expect BEV order intake to remain strong until summer when new models will kick in.
=== Q1 2023 Results ===
* Q1 operating result benefitted from a one-effect swing in fair value effects outside hedge accounting, amounting to about 900 million euros.
* Product costs were slightly headwind y/y, mainly due to one-offs.
* Recorded a significant overhead cost in Q1 (against their overhead cost discipline) due to wage increases in 2023 and weaker sales revenue growth.
* R&D expenses increased by around 1 billion euros in Q1 .
* Brand Group Progressive operating profit was also burdened by valuation effects of about 0.3 billion euros, resulting from order residual value model. Adjusted for valuation effects, operating margin would have been 6%, still below their 8% to 10% 2024  target. The difference between the 6% and the 8% to 10% is the impact of supply chain issues.
* Contract volume at the Volkswagen Mobility Group was stable. A slightly lower number of financing contracts were compensated by an increase in leasing and insurance contracts.
* Operating profit at the Volkswagen Financial services was down 6% to 881 million euros due to normalization of used vehicles prices and provisioning of residual value risk as well as increased interest rates.
*'''The proportionate operating result from China joint ventures fell by 31% y/y to 0.4 billion euros driven by the margin dilutive effects of the rise in BEV share in a competitive market.'''


=== Delivery numbers ===
=== Delivery numbers ===
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* Q1 marked launch of the first Porsche and Audi models based on the PPE platform.
* Q1 marked launch of the first Porsche and Audi models based on the PPE platform.
* When it comes to order intake, they still have more chance with Q6 e-tron and the ID.7 Tourer, which are not in the market yet.
* When it comes to order intake, they still have more chance with Q6 e-tron and the ID.7 Tourer, which are not in the market yet.
 
* They still plan until 2023 to have a BEV share of 50%. But the development speed will not be linear, China will develop very fast but Europe and U.S will not develop as fast as expected. In short, BEV penetration will not develop as fast as they expected.
=== Q1 2023 Results ===
 
* Q1 operating result benefitted from a one-effect swing in fair value effects outside hedge accounting, amounting to about 900 million euros.
* Product costs were slightly headwind y/y, mainly due to one-offs.
* Recorded a significant overhead cost in Q1 (against their overhead cost discipline) due to wage increases in 2023 and weaker sales revenue growth.
* R&D expenses increased by around 1 billion euros in Q1 .
* Brand Group Progressive operating profit was also burdened by valuation effects of about 0.3 billion euros, resulting from order residual value model. Adjusted for valuation effects, operating margin would have been 6%, still below their 8% to 10% 2024  target. The difference between the 6% and the 8% to 10% is the impact of supply chain issues.
* Contract volume at the Volkswagen Mobility Group was stable. A slightly lower number of financing contracts were compensated by an increase in leasing and insurance contracts.
* Operating profit at the Volkswagen Financial services was down 6% to 881 million euros due to normalization of used vehicles prices and provisioning of residual value risk as well as increased interest rates.
* '''The proportionate operating result from China joint ventures fell by 31% y/y to 0.4 billion euros driven by the margin dilutive effects of the rise in BEV share in a competitive market.'''
 
=== Outlook ===
* Volkswagen expects performance in the coming quarters to be supported by new and upcoming models such as the ID.7, Macan Electric and the Q6 e-tron.
* '''They said they are now in the process of ramping up the supply situation at Audi and performance should improve already in Q2.'''
* Efficiency programs initiated at the brand core in 2023 will will unfold its full impact in 2024.
* 2024 will be the big year for R&D spend as already seen in Q1 (factored in 2024 outlook).
* Volkswagen expects model and brand mix to improve in the coming months.
* They expect pricing to continue to be slightly supportive, "benefiting from rollover effect from last year's price increases but burdened by higher temporary sales promotions for our electric vehicles."
* Expect product costs to provide tailwind for the rest of the year (material cost to contribute 1 billion euros tailwind going forward).
* They said they review the global BEV sales expectations continuously and are prepared to adjust capacity and capex planning in Powerco accordingly, if necessary.
* '''Volkswagen expect an improvement in margin and financial performance already in Q2 and stronger earnings trajectory in the rest of the year.'''
* They will book a severance expense of 900 million euros in Q2 which will be compensated in the full year.
* Their target for net cash flow in 2024 is 4.5 to 6.5 billion euros. About 6 billion will go to the ramp up of the battery business, 4 billion out of that is R&D and Capex and 2 billion is for additional M&A (more control of the value chains eg raw materials such as cobalt, nickel and lithium.
* '''In Q2, they expect margin to be inline with their full-year guidance, but the €900 million severance cost might lead to a burden in that respect. However, they expect to compensate in the remainder of the year.'''
* They expect significant improvement in Audi  margin in Q3 going forward.
* Wages were not increased in Q1 2023, hence Q2 2024 going forward will benefit from increases in the other quarters last year (n strong comps as a result of that).
* They expect order intake to increase throughout the year since some important models such as those of the Tiguan Brand were not available for order in Q1. They also expect BEV share to increase though they are margin dilutive.
* Powerco losses will increase with the ramp-up (that's clear until 2025).
* They expect CARIAD sales revenue to improve with the ramp-up of new models such as E Macan, ID.Tourer, Q6 e-tron.
* Their long-term target for automotive net liquidity is more than 10% of sales.


=== China ===
=== China ===
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* Arno only said they are open for free float at the right time.
* Arno only said they are open for free float at the right time.
=== CO2 emissions compliance in 2025 ===
* They expect to be 100% compliant in 2024.
* Arno said the compliance in 2025 will be challenging due to new targets but they strive to do so due to the new models such as the E Macan and Q6 e-tron.
* Pricing conditions for BEVs could affect their compliance since they will follow the strategy of value over volume.


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