Volkswagen Stock: Profit Slump Triggers Dividend Cut

Volkswagen is experiencing turbulent times on the stock market as the German automotive giant reported a dramatic profit decline in the 2024 fiscal year. Operating profit fell by more than 15% to €19.1 billion, while net profit plummeted nearly 31% to €12.4 billion. The operating margin contracted from 7.0% to 5.9%. This downturn has immediate consequences for investors, with dividends reportedly being slashed by approximately 30%. Market participants responded swiftly, driving VW shares down by 2.6%. The company's financial challenges reflect a complex array of factors including declining sales volumes, substantial restructuring costs, and intensifying competition in the Chinese market. These developments have abruptly halted the temporary recovery of Volkswagen stock and raised questions about whether the group needs to realign its growth strategy.

Cost-Cutting Measures and Electric Strategy Pivot

In response to financial pressures, Volkswagen is intensifying its austerity measures. The management board will forego 11% of their total compensation over the next two years, saving the company more than €4 million annually. Simultaneously, the automaker is strategically repositioning its electric mobility approach with a stronger focus on cost efficiency. A cornerstone of this strategy involves producing a new entry-level electric vehicle priced at approximately €20,000 at the Portuguese Palmela factory beginning in 2027. This follows the earlier decision to manufacture the ID.2all model, with its €25,000 starting price, in Spain rather than Germany, where production costs would be prohibitively high.