Over the past few years, we heard from time to time that the introduction of electric cars will result (at least at first) in a decrease in margins for manufacturers.

According to Volkswagen CEO Herbert Diess, that's not necessarily the case and the company is not expecting lower margins:

"We do not expect a deterioration in margins. Our advantage is that all our brands have the same platform for electric products and the same batteries that we buy in China,” Diess said in an interview with daily la Repubblica’s Monday supplement A&F.

Diess points out that margins on BEVs will stay similar to ICE cars thanks to a single platform (MEB) for dozens of models and many brands. In other words, costs will be kept under control if the scale is high enough.

The question is what will happen with margins in the case of other manufacturers that are smaller? Following the logic, their margins will be hurt.

The article adds also that the demand for Volkwagen Group's BEVs is considered to be high:

Industry analyst Matthias Schmidt (schmidtmatthias.de) quotes Volkswagen Group forecast that envisions 6.5-7.5% return on sale in 2020, which will increase to 7.0-8.5% by 2025:

  • Volkswagen: 4-5% in 2020 and at least 6% in 2025
  • Audi: 9-11% in 2020 and 9-11% in 2025
  • Porsche: >15% in 2020 and >15% in 2025
  • Skoda: 6-7% in 2020 and at least 7% in 2025

Volkswagen is, by the way, the least profitable from the four (although not all brands were included in the chart):


Source: Reuters

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