According to calculations by an industry expert, the car manufacturer VW could be making large losses in the millions through its current discount campaign in Germany. Ferdinand Dudenhöffer, head of the Center Automotive Research in Bochum, estimates the manufacturer’s losses from the campaign, which runs until the end of March, at 38.5 million euros. “The VW discount campaign not only entails a profit risk, but also a price spiral risk,” said Dudenhöffer. Accordingly, the discounts would not only jeopardize the Wolfsburg-based car manufacturer’s profit plans, but would also, in the long run, fuel a price war that would lead to unprofitable prices. “The fact that VW is accepting both risks shows how difficult the fight between traditional car manufacturers for electric cars is.”
With the discount campaign, VW responded at the beginning of the year to the cancellation of the previous government subsidy for electric car buyers. The federal government surprisingly announced the end of funding in December. The “Volkswagen environmental bonus” is available until March. Accordingly, the prices for the ID.3 compact car with a 58 kWH battery fall by around 7,000 euros compared to the previous list prices. The SUV ID.4 was even cheaper by 7,700 euros. Discounts also apply to the ID.5 and the brand new ID.7 sedan.
Market leader VW wanted to counteract the weak demand for electric cars. Competitors such as Tesla and BYD from China have also significantly reduced their prices. According to car experts, they can afford price reductions better than VW. According to Dudenhöffer, unlike VW, you do not have to fear any losses from the discounts. “The collapse in demand and the ruinous discount competition that Tesla and some Chinese can afford can rob the European auto industry of the future,” warns the auto professor.
According to his example calculation, VW now generates a loss of around 3,500 euros with each ID.4 pro vehicle with an entertainment package. With the bonus valid until mid-December, there was a profit of around 1,500 euros. Dudenhöffer bases his calculations on a profit margin of four percent for the VW brand based on the figures for the first six months of 2023. On this basis, he calculates the profit per car and – including the previously applicable own share of the premium – the loss due to the new discounts. For the total loss of 38.5 million euros in the discount period, he expects 11,000 vehicles to be sold in Germany, slightly fewer than in the previous year.
These data show that Dudenhöffer’s estimates can only be approximate values - what is not taken into account is that the many business customers have probably already been granted higher price discounts in some cases. But the numbers show that the discounts will make it more difficult for the brand to achieve its current profit targets. Brand boss Thomas Schäfer presented a savings program in December with the aim of significantly increasing profit margins. A key element in this savings program should actually be higher revenue per vehicle.
This article first appeared in the business magazine “Capital”, which, like stern, is part of RTL Deutschland.
