German automaker Volkswagen has stated that it is confident that cost cuts will help to raise its profit margins over the next couple of years. The second world’s largest car maker made this known on Tuesday after outlining its ambition to further expand its electric mobility .
“Our good performance in 2020, a year dominated by crisis, will give us momentum for accelerating our transformation,” Chief Executive Herbert Diess said in a statement.
Preferred shares in the company rose as much as 5% to their highest level since July 16, 2015, given the carmaker a market valuation of more than 116 billion euros ($138 billion). They are up more than a third year-to-date.
Part of its ambition is to double the delivery of its electric vehicles to 1 million this year as it said it would also apply a standardized platform model which was introduced for vehicular production years ago to software, batteries and charging.
Comments made by the company’s boss Herbert Diess came just a day after the company had unveiled its plans to further expand its electric vehicle manufacturing in Europe by building a dozen battery cell plants in the continent as well as a large network of charging points globally which will help it to become much more relevant in the EV industry or overtake Tesla if possible.
Volkswagen confirmed it aimed for an operating margin of 7%-8% by 2025, adding it would likely end 2021 at the upper end of a 5%-6.5% target corridor.
Stellantis, the world’s fourth-largest carmaker created through the merger of FCA and Peugeot maker PSA in January, is targeting an adjusted operating profit margin of 5.5%-7.5% this year.
With that, the company will be able to lower its fixed costs by US$1,192,380,000 (EU€ 2 billion) by the year 2023 unlike 2020 which is a decline of 5% as well as a decline of 7% in materials costs over the same period according to the German car maker.
This move will definitely have an impact on the economy as well as personnel with reports stating the company could cut about 4,000 jobs at its plants in Germany alone. The company stated on Sunday that it will offer early or partial retirement to older employees which is a move that could confirm the earlier reports of the big job cut.
The group employs about 670,000 staff globally.
“We aim to put the ambitious transformation of the Volkswagen Group on a solid financial basis,” incoming finance chief Arno Antlitz said.