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### Volkswagen Announces Investment Reduction Plan and Bonus Changes
Volkswagen Group, the German automotive giant, has unveiled a new investment strategy aimed at enhancing capital efficiency and focusing on high-margin segments. The plan, which will be in effect from 2025 to 2029, is expected to prioritize cost efficiencies and margin improvements, as the company navigates profitability pressures such as a projected decline in the operating margin to 3.7% in Q1 2025.
The reduction in investment ratio, set to drop to about 10%, will impact the company's capital expenditures relative to revenue. While exact figures for the full 2025–2029 period are not detailed, the reduction in investment intensity suggests Volkswagen will focus on areas like premium SUVs and electric vehicles (EVs) to boost premium margins and capitalize on growing demand for electrified vehicles.
One of the key segments set to benefit from continued investment is premium SUVs and EVs, with models such as Audi’s A6 e-tron and Q5, especially those produced in the U.S., targeted for increased investment. Volkswagen is also advancing affordable, electric entry-level vehicles, with a planned 2027 launch targeting around €20,000 price point, aiming to fulfil social responsibility on accessible e-mobility.
In an effort to manage costs, Volkswagen is reducing its reliance on transatlantic logistics by localizing production and mitigating import tariffs. This includes strategic partnerships like the one with Rivian, which secured $5.8 billion in funding, to leverage supply chain and software synergies. However, industry-wide tariff hikes and policy uncertainties have caused delayed or scrapped battery production projects in the U.S., affecting Volkswagen’s investment decisions in this area.
The investment cutbacks reflect a cautious stance to preserve cash flow, improve operating margins, and sustain profitability amid global market and supply challenges. As a result, Volkswagen is planning to invest around €165 billion from 2025 to 2029, significantly less than the €180 billion previously planned for 2024 to 2028.
In other news, around 120,000 employees in Germany will benefit from a bonus payment, with collective bargaining employees receiving a profit-sharing bonus of almost 4,800 euros for the past year. However, the flexible May payment will be omitted for two years, leaving only the fixed advance payment of around 1,900 euros. The tariff bonus is also set to be significantly reduced in the years 2026 and 2027.
Volkswagen is adapting the development of its own battery division more closely to market trends, and the cuts primarily affect the internal combustion engine segment. The company is also facing a multitude of external challenges, including political uncertainties, trade restrictions, geopolitical tensions, and pressure from local manufacturers in China and Europe.
Despite the challenges, Volkswagen is planning a moderate increase in revenue for 2025, aiming to increase sales by up to 5%. From 2028, the bonus payment is to be gradually increased again to its original level by 2031. The Board of Directors is waiving 11% of Their Salary for the Years 2025 and 2026. This also affects CEO Oliver Blume, who expects the operating profit margin to be in a range of 5.5% to 6.5% - roughly at the level of the previous year.
The group's revenue increased slightly by nearly 1% to €324.7 billion, but the Chinese market contributed less profit. Volkswagen suffered a significant drop in profits last year, with net profit falling by nearly 31% to €12.4 billion, and operating profit shrinking to €19.1 billion, a drop of over 15%. The dividend for the preferred share listed on the DAX is set to fall by 30% to €6.36 per share.
Volkswagen's new investment strategy focuses on personal-finance efficiency, aiming to reduce investment ratio to 10% and invest €165 billion from 2025 to 2029, a significant decrease from the previously planned €180 billion. This shift in finance might impact the company's business, as it prioritizes high-margin segments like premium SUVs and electric vehicles (EVs).
As part of the cost-management measures, Volkswagen is offering a bonus payment of almost 4,800 euros to around 120,000 employees in Germany for the past year, although the flexible May payment will be omitted for two years. This move seems to be a part of their personal-finance strategy, aimed at maintaining employee satisfaction while navigating financial challenges.
