Volkswagen wants to put fossil fuel cars and associated emissions scandals behind for good

Volkswagen wants to put fossil fuel cars and associated emissions scandals behind for good

13 July 2021Reading time: 3 minutes

Volkswagen AG is currently the largest car manufacturer in Europe and the second largest in the world. Under brands such as Volkswagen, Audi, Seat, Skoda, Porsche, Lamborghini, Bentley, Bugatti and Ducati, the company produces around 10 million vehicles annually. In addition to passenger cars, Volkswagen also produces delivery vans and trucks. From its headquarter in Wolfsburg, Germany, the company has been managed by CEO Herbert Diess since 2018. Volkswagen has now more than 662,000 employees worldwide.

For the whole of 2020, Volkswagen AG recorded a turnover of EUR 222.9 billion and a profit of EUR 8.8 billion. With a market capitalization of more than EUR 126 billion at the moment of writing, the company is in the top three largest listed companies in the DAX.

Diesel scandal continues to haunt Volkswagen

In 2015, Volkswagen became discredited after the so-called cheating software was discovered in the United States. Due to this software, certain diesel cars met the environmental requirements during a test, while this was not the case in practice. Ultimately, this scandal cost Volkswagen billions of euros in damage claims and recalls. Moreover, the reputation of the car brand took a big hit.

Years later, Volkswagen is still dealing with the aftermath of this scandal. Although Volkswagen recently won a lawsuit in the US, it became clear a few days later that the state of Ohio can still sue the company for at least a billion dollars. Potential lawsuits are also looming in the states of Florida and Utah. For now there doesn’t seem to be the end of this long-lasting debacle for Volkswagen.

Full focus on electric cars

In order to repair the reputation damage suffered by the diesel scandal and to better anticipate the future, Volkswagen has great ambitions when it comes to making its fleet more sustainable.

The main goal is to gradually say goodbye to fossil fuel engines. At the moment, Volkswagen has already launched a number of successful fully and semi-electric cars. By 2030, Volkswagen wants 70 percent of the cars sold to be electrically powered and from 2035 the car manufacturer even wants to stop selling cars with fuel engines in Europe completely, followed later by the US and China. Analysts at UBS expect that this drive to become more sustainable will make Volkswagen one of the best EV car manufacturers, together with General Motors and Hyundai, surpassing Tesla, among others.

However, sales of the latest electric Volkswagen in China are disappointing. It also remains uncertain whether the global chip shortage will negatively affect the company's ambitions.

(Car)Sharing is caring

Volkswagen is also considering taking a majority stake in car rental company Europcar, in order to capitalize on the trend of people preferring to rent a car rather than buy it. Car ownership is declining rapidly, especially in large cities. It is striking that Volkswagen previously owned Europcar, but sold it in 2006 for EUR 3.3 billion. An initial offer of EUR 0.44 per share would have been rejected by Europcar. It therefore remains uncertain whether Volkswagen will actually take over the car rental company.

Stock price development

The stock price of Volkswagen has increased by 50 percent in one year to EUR 211 (05.07.2021). Since the beginning of June, the price has fallen slightly again.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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29/09/2022 07:45:38