Volkswagen partners with Rivian, increasing fair value estimate to EUR 351 per share

From Morningstar: 2024-06-26 16:07:00

Volkswagen announced an investment and joint venture with startup EV maker Rivian to reduce software investment requirements. Fair Value estimate increased to EUR 351 per share. Revenue guidance for 2024 includes up to EUR 338 billion with group adjusted EBIT of 7%-7.5%. Total vehicle volume estimated at 9.2 million and consolidated revenue at EUR 312 billion. Margins face uncertainty amid industry headwinds.

Volkswagen’s group adjusted EBIT margin has varied from 8.1% to 1.8% over 15 years. Assumptions predict a 6.8% EBIT margin in the near future, with a normalized midcycle margin of 5.5%. The company uses a 10.3% weighted average cost of capital due to industry volatility. Efficiency may increase temporarily as BEVs optimize but margins are expected to stay consistent with historical trends.

Volkswagen leverages its scale with Rivian investment to accelerate EV platform build. The company has a competitive global approach to transitioning to BEVs with brands like Audi and Porsche. Its MEB platform supports a BEV offensive with plans to reach 20% of global sales in BEVs by 2025. An architecture strategy aims to reduce costs while targeting an adjusted EBIT margin of 7%-8% in 2025.

Volkswagen’s common architecture manufacturing strategy reduces costs and increases scale. However, the strategy carries risk if consumer demand for BEVs does not meet expectations. The company aims to achieve an adjusted EBIT margin of 7%-8% by 2025.



Read more at Morningstar: Volkswagen Fair Value Estimate Rises After Rivian…