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Volkswagen AG shares declined after outlining weaker-than-expected third-quarter earnings and hedging losses.
Europe’s biggest carmaker now sees operating return on sales for the year as low as 7%, from at least 7.5%, it said late Friday in a preliminary quarterly release. VW is due on Thursday to report full results for the three months through September.
Shares fell 3.3% in early trading, the biggest intraday decline in more than a month. The stock is down 13.6% this year.
The company missed expectations on higher product costs for its volumes brands, a pressing issue for the nameplate VW brand where the company is scrambling to work out on a major efficiency plan to boost earnings. Flooding impacting a supplier in Slovenia also crimped vehicle output during the quarter.
“We had not expected this magnitude of deterioration,” Citi analysts including Harald Hendrikse said in a note. “VW blamed production losses from the Slovenia flooding and higher product costs (again), but this should have been more than offset by 12% higher revenues.”
VW’s revision and earnings miss follows Tesla Inc. Chief Executive Officer Elon Musk striking a cautious tone last week. The electric-car leader reported its first quarterly drop in sales this year while margins fell to the lowest in over four years. On a conference call, Musk repeatedly mentioned the impact of high interest rates on consumer confidence.
As demand challenges grow, VW already slowed EV output at some sites, including its Wolfsburg headquarters last month after the flooding in Slovenia. The carmaker last week said orders have fallen short of targets after weak demand particularly in Europe.
At the same time, VW is fighting to stay relevant in China’s EV market, which has been saturated by cheaper models from local producers. The company is holding talks with powerful labor representatives on savings goals. It is due to present an update of its rolling five-year spending plan next month.
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