By 2018, it aims to be the world’s top carmaker by volume, leapfrogging GM and Toyota. What’s more, Volkswagen is one of the few carmakers that continues to expand despite volatile automobile demand. As The Economist points out, slowing growth in those areas, particularly in China, would hurt the company’s sales, but its broad global diversification helps lower this risk. In addition, Volkswagen has a strong presence in emerging economies like China, where it controls 18% of the market, and South America, where it has a 19% share. It aims to sell over 1 million vehicles in the U.S. There are signs these investments are already paying off: In 2011, it sold 444,000 cars in the U.S., up 23% from 2010. In addition, Volkswagen’s new plant in Tennessee and its revamped dealer network should help it build on its small 3.5% market share in the U.S. Still, adding Porsche gives the company plenty of upside, including the ability to attract more well-heeled customers. Growth Plan, Diversification Give Volkswagen Serious Upsideĭespite the strong sales and the Porsche acquisition, Volkswagen’s stock is likely to remain in a narrow range until the European outlook brightens. The gains came after profits more than doubled, to 18.9 billion euros, in 2011. Operating income rose 10%, to 3.2 billion euros, or 6.78 euros per share, cruising past the 2.7 billion euros that analysts expected. The company ended the first quarter with cash and cash equivalents of 20.6 billion euros, up from 18.3 billion euros on December 31, 2011. That’s mainly due to an 11% increase in sales volumes, to 2.2 million vehicles. In the first quarter, Volkswagen’s revenue jumped 26% from a year ago, to 47.3 billion euros. The company’s sales remain strong despite the weak global economy. Still, he cited Volkswagen as a stock to watch, citing its low p/e ratio (3.47) and staggering growth estimate of 48.8% over the next five years. What he saw of the new models left him feeling optimistic, especially about the prospects of Ford F, mostly because it is based in the U.S., and is more shielded from the high yen and the European debt crisis, which Japanese and European carmakers, respectively, must still deal with.
Porsche Takeover Builds on Volkswagen’s Strong Foundationīack in January, Investing Daily editor Jim Fink wrote about the car industry’s outlook based on his observations of the Detroit Auto Show that month. Volkswagen has also said that it will soon start building some Porsche models in its plants. The pair are already working together on Porsche’s Macan compact SUV, which will be launched in 2014. Under the ownership of VW, Europe’s biggest carmaker, it may be able to increase its production capacity. Reuters also points out that Porsche’s global sales are now 20% above their previous record, and the high-end sports car maker is struggling to keep up with rising demand. The two look set to form a powerful combo. In addition, according to Reuters, the company has said that it expects savings from the Porsche takeover to add up to 700 million euros and eliminate Porsche’s debt of 20 billion euros. “Porsche is the world’s best premium car story.” Pearson also predicted that the completion of the Porsche takeover, expected on August 1, would increase Volkswagen’s earnings by 6 percent in 2013. “VW is getting a good deal,” wrote Morgan Stanley analyst Stuart Pearson in a note quoted on. In all, Volkswagen has spent 8.4 billion euros on the Porsche takeover, excluding debt. Porsche Takeover Gives Volkswagen a Strong Asset That attempt failed, leaving Porsche with 10 billion euros in extra debt used to fund its bid. The complex tax situation is indicative of the long, complicated dance that the two companies have undergone since Porsche originally tried to take over Volkswagen in 2009.
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