Volkswagen: Electric Vehicle Demand Rises, Profits Come Under Pressure
Volkswagen’s electric vehicles are now proving popular in Europe. In the first nine months, the group delivered 586,100 electric vehicles here, 12.1% more than in the previous year, when the figure was 522,700. This trend looks set to continue, as electric vehicles now account for around 40% of the European order book. New models are already waiting in the wings. On the eve of the Paris Motor Show, Volkswagen presented the Electric Urban Car Family: four small electric vehicles from VW, Škoda and CUPRA, to be built in Martorell and Pamplona and sharing more than 80% of their components. There are already almost 150,000 pre-orders.
None of this is yet reflected in profits. In mid-September, Volkswagen lowered its forecast for the current year. It now expects an operating return on sales of only around 1%, compared with the previously planned 4.0 to 5.5%. Special items amount to around EUR 10 billion, with the impairment of Porsche’s goodwill alone accounting for around EUR 6 billion. Adding to this are the weak business in China, where deliveries slumped 30.2% to 1,378,800 vehicles through September, and weak results at Audi and the VW brand. The rapid shift toward electric vehicles is also weighing on margins.
How does the group intend to get out of this situation? With the Future Plan 2030, which the supervisory board approved in early September. By 2030, the operating margin is to rise to 9%, while the group plans to cut around 50,000 jobs. In Europe, Volkswagen has excess capacity for more than 500,000 cars. At the end of September, the group terminated several collective agreements effective at the end of the year, but the future collective agreement, with its job-security provisions, remains unaffected. IG Metall is demanding a 5% pay rise, which Volkswagen considers incompatible with the situation. More will be known on October 29, when the Wolfsburg-based group presents its figures for the first nine months.
Strategic Resources: Raw Material for Green Steel
Experts say melting steel in an electric furnace cuts emissions by around 75%. But these furnaces need high-quality metallic iron, and that is precisely what is in short supply. Canada mines 70 million tonnes of iron ore annually that could be pelletised, but only has pellet plants for 23 million tonnes. Closing this gap requires natural gas, cheap electricity and a port. All of this is available in Port Saguenay. There, a Canadian company called Strategic Resources is developing a hub for iron, vanadium and titanium. Vanadium and titanium in particular are classified as critical minerals, but high-quality iron pellets are also in demand.
The company has already planned to expand its approved pellet plant from 1.5 million tonnes to 4 million tonnes and has submitted all the documentation. For the first phase, the Canadians expect to build a 4 million-tonne plant in Port Saguenay at a cost of USD 500 million. Operating costs are just USD 16 per tonne, and at current spot prices, this leaves a margin of around USD 40 per tonne. Help is coming from the state. It is financing the conveyor belt and utility facilities for a combined CAD 280 million. Javelin Global Commodities is handling purchasing and sales, backed by a 10-year contract and a USD 150 million working capital facility. According to the company, approval of the pellet plant is at an advanced stage of review.
The mine and metallurgical plant already have all construction permits. In the second phase, the company will connect its own BlackRock deposit. Its reserves of 127.8 million tonnes of ore are sufficient for 39 years. The company plans annual production of around 550,000 tonnes of pig iron, around 4,400 tonnes of ferrovanadium, and around 120,000 tonnes of titanium slag. The company is also active in Finland. The University of Oulu’s FutSteel research project, which involves steel group SSAB, has selected vanadium-rich concentrate from the Mustavaara project. With Tyfast, the company is also exploring a route from vanadium to batteries. The pellet plant could mark the beginning of a new era for the Canadians.
Infineon – Silicon carbide for tomorrow’s electricity
No electric car runs without power semiconductors. They ensure that electricity from the battery reaches the motor, and Infineon supplies such chips. An important material for this is silicon carbide. On 15 October, the Neubiberg-based company extended its supply agreement with Wolfspeed and expanded it to include wafers with a diameter of 200 mm alongside those with a diameter of 150 mm. The supply relationship between the two has existed for more than 20 years. According to the announcement, which cites market research firm Yole, the market for silicon carbide power semiconductors is expected to grow from USD 3.4 billion in 2024 to USD 11.1 billion in 2031.
At the same time, Infineon is restructuring its portfolio. The NOR Flash and F-RAM memory chip business is being sold to Taiwan’s Winbond for USD 1.12 billion in cash, as agreed on 16 September. The money is to flow into areas where the Neubiberg-based company expects the most growth. These include data centres for artificial intelligence. In keeping with this, it acquired Bengaluru-based C2i Semiconductors on 5 October. The Indian company develops controllers and power stages for the power supply of such data centres. Its team is strengthening development in India. Infineon already employs around 2,800 people there.
The restructuring is not entirely without complications. The sale to Winbond is not expected to close until the second half of 2027, with regulatory approval required first. Until then, the memory business will remain part of Infineon. The acquisition of C2i also still has to prove itself in day-to-day operations. How well the Neubiberg-based company is performing overall will be shown by the figures for the fourth quarter and the financial year, which are provisionally scheduled for release on 10 November. If Infineon succeeds in serving electric cars and data centres alike, the group will have two strong pillars. The direction is right.
Conclusion
Electric vehicles are changing the entire supply chain, from ore to chip. Volkswagen is delivering significantly more electric vehicles in Europe, but is earning too little. The Future Plan 2030 must now deliver. In Québec, Strategic Resources has secured the construction permits for the mine and metallurgical plant, state-funded infrastructure and, with Javelin, a firm partner for procurement and sales. If the permit extension for the pellet plant is secured, an important milestone would be reached. Infineon is securing its silicon carbide supply with Wolfspeed and aligning its portfolio with electric vehicles and data centres. More than just automakers depend on electric vehicles.
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