After a long dry spell, the motto in Wolfsburg is "On to new heights". For many years, Volkswagen's share price bobbed along, in some cases falling astronomically far from its former record highs. The last time the VW share price was above the important EUR 200 threshold was in August 2015, but in March of this year the carmaker made a break for it. With a trifecta of strong sales figures, an ambitious electric strategy and an expected acceleration in returns, the car stock ignited the turbo. In the past month alone, the share price has risen by 37.5%. Since the beginning of the year, the gain has even added up to 60%, which puts the Wolfsburg-based company in first place in the DAX's 2021 performance ranking.
Volkswagen is not quite at the top of the German share index in terms of market value. However, with a market capitalization of EUR 137 bn, the company is only around EUR 3 bn behind first-place SAP. Should VW's share price soon manage to flirt with its record high of EUR 262, the carmaker would pass the software provider to become Germany's most valuable company.
For now, the recent strong sales figures are providing a positive underlying sentiment. Europe's largest carmaker sold 2.43 million vehicles in the first quarter, around a fifth more than a year ago. In particular, the Germans stepped on the gas in the Middle Kingdom. In China, now VW's most important market, 60% more new vehicles were delivered from January to March compared to the same period last year. As a result, the People's Republic accounts for 41% of the group's total sales.
The high demand also makes VW optimistic for the future, which provides additional support for the current share price rally. For the current year, the board has set its sights on strong growth in sales and earnings. While the operating return in the Corona year was still a low 0.6%, it is expected to rise to 3% to 4% in the current year. For 2023, the group even expects a margin of 6%. However, management has issued a cautionary note on the targets: On the one hand, it depends on the further course of the pandemic, and on the other hand, production depends heavily on the availability of the increasingly scarce semiconductors.
As the saying goes, all good things come in threes. The third and probably most important reason for the current breathtaking performance of the VW share is the ambitious goals regarding electromobility. According to the latest plans, Volkswagen is putting its product range under much more power than previously expected. In the current year, the group wants to deliver 450,000 electrified vehicles, i.e. battery and hybrid drives. That would be more than twice as many as last year. Analysts even assume that the Germans could already be on par with Tesla in terms of e-car delivery figures next year.
The pace remains high in the medium term as well. By 2030, VW wants to boost the share of pure e-cars in sales in Europe to over 70%, which is double the previous plan of 35%. In the two largest car markets, the US and China, VW is aiming for an E share of more than 50% by then. However, the ambitious plans will consume money in advance: around EUR 16 billion will be invested in e-mobility, hybridization and digitalization by 2025. To recoup the money, however, VW is not relying solely on the sale of its electric vehicles. In typical Tesla fashion, the group also wants to set up its own battery cell production facilities. Six "gigafactories" are to be built in Europe by 2030. The company is also setting its sights on other sources of revenue, such as charging and energy services. Together with partners, for example, the number of public fast-charging stations across Europe is set to increase fivefold to 18,000 by 2025.
VW shares now seem to have a lot of fantasy priced into them regarding growth opportunities as well as the first disruption stage of the automotive industry, electromobility. Therefore, it would not be surprising if the DAX stock would soon take a breather after the months-long price rally. Investors can "sweeten" this time with two new softcallable barrier reverse convertibles. The two securities, which are offered in CHF and EUR, offer attractive returns even if prices stagnate or fall moderately. The BRCs have a coupon of 9% p.a. and a risk buffer of 35%. Due to the soft callable function, the maximum term of one and a half years can be reduced to a maximum of six months.
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