Group Management Report

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Prospects for 2023

Our planning is based on the assumption that global economic output will grow overall in 2023 albeit at a slower pace. The persistently high inflation in many regions and the resulting restrictive monetary policy measures taken by central banks are expected to increasingly dampen consumer spending. We continue to believe that risks will arise from protectionist tendencies, turbulence in the financial markets and structural deficits in individual countries. In addition, continuing geopolitical tensions and conflicts are weighing on growth prospects; risks continue to be associated with the Russia-Ukraine conflict. Furthermore, it cannot be ruled out that risks may also arise if new variants of the SARS-CoV-2 virus occur, particularly with regard to regional outbreaks and the measures associated with these. We assume that both the advanced economies and the emerging markets will show positive momentum on average, but with below-average growth in gross domestic product (GDP).

The trend in the automotive industry closely follows global economic developments. We assume that competition in the international automotive markets will intensify further. Uncertainty may arise from the continued shortage of intermediates and commodities. This may be further exacerbated by the fallout from the Russia-Ukraine conflict and, in particular, lead to rising prices and a declining availability of energy.

We predict that trends in the markets for passenger cars in the individual regions will be mixed in 2023. Overall, the global volume of new car sales is expected to be noticeably higher than in the previous year. For 2023, we anticipate that the volume of new passenger car registrations in Western Europe will be significantly above that recorded in the reporting period. In the German passenger car market, we predict a noticeable increase in the volume of new registrations in 2023 compared with the previous year. Sales of passenger cars in 2023 are expected to significantly exceed the prior-year figures in markets in Central and Eastern Europe – subject to the further development of the Russia-Ukraine conflict. The volume of sales in the markets for passenger cars and light commercial vehicles (up to 6.35 tonnes) in North America in 2023 is forecast to be noticeably higher than the level seen the previous year. We anticipate a significant increase overall in new registrations in the South American markets in 2023 compared with the previous year. The passenger car markets in the Asia-Pacific region are expected to be noticeably up on the prior-year level in 2023.

Trends in the markets for light commercial vehicles in the individual regions will also be mixed; on the whole, we expect a noticeable increase in the sales volume for 2023.

For 2023, we expect to see a noticeable upwards trend in new registrations for mid-sized and heavy trucks with a gross weight of more than six tonnes compared with the previous year in the markets that are relevant for the Volkswagen Group, with variations from region to region. A significant increase in overall demand is anticipated for 2023 in the bus markets relevant for the Volkswagen Group, whereby this will vary depending on the region.

We assume that automotive financial services will prove highly important to global vehicle sales in 2023.

We anticipate that, amid challenging market conditions, deliveries to customers of the Volkswagen Group in 2023 will stand at around 9.5 million vehicles. This assumes that the shortages of intermediates and commodities and the bottlenecks in logistics will become less intense.

Challenges will arise in particular from the economic situation, the increasing intensity of competition, volatile commodity, energy and foreign exchange markets, and more stringent emissions-related requirements.

We expect the sales revenue of the Volkswagen Group in 2023 to be 10% to 15% higher than the prior-year figure and the operating return on sales to lie between 7.5% and 8.5%. In the Passenger Cars Business Area, we forecast an increase of around 7% to 13% in sales revenue compared with the previous year, with an operating return on sales of between 8% and 9%. For the Commercial Vehicles Business Area, we anticipate an operating return on sales of 6% to 7% amid a 5% to 15% year-on-year increase in sales revenue. In the Power Engineering Business Area, we expect sales revenue to be slightly above the prior-year figure and operating profit to be in the low triple-digit million euro range. For the Financial Services Division, we forecast a strong increase in sales revenue compared with the prior year and an operating result in the range of €3.5 billion.

In the Automotive Division, we expect the R&D ratio to come in at around 8% in 2023 and the ratio of capex to sales revenue to be around 6.5%. We anticipate a very strong year-on-year increase in net cash flow for 2023. This will particularly include increasing investments for the future and cash outflows from mergers and acquisitions for battery factories, which are a cornerstone of the Volkswagen Group’s transformation. Net liquidity in the Automotive Division in 2023 is expected to be between €35 billion and €40 billion; this includes cash inflows and outflows in connection with the IPO of Porsche AG. We anticipate a return on investment (ROI) of between 12% and 15%. Our declared goal remains unchanged, namely to continue with our robust financing and liquidity policy.

Wolfsburg, February 21, 2023
The Board of Management