If you are interested in investing in automotive companies, you should know the name Volkswagen (VW). However, investing in Volkswagen requires careful consideration and can be a strategic move because of its current position in the automotive industry.
Volkswagen is Germany’s one of the largest automotive manufacturers and was founded in 1937 by Ferdinand Porsche. In this blog, we will look at the best Volkswagen stocks to invest in current market dynamics and factors influencing VW stock performance, providing you with all the critical information to help you make an informed decision.
Understanding Volkswagen’s Stock Landscape
Over a Few Years, VW stock has experienced a 6% rise, setting it to its biggest one-day gain in the past eleven months. Factors are playing backstage, as the stocks were down for 10-12 months.
Volkswagen holds six percent of the overall global automotive market 2023, coming second after Japan-based Toyota. Between 2006 and 2023, VW tripled its sales.
However, VW sales fell drastically with the slumping demand for electric vehicles, expecting their growth in sales revenue to slow in 2024 because of intense competition and economic conditions worldwide. As reported, VW’s shares in March 2024 dropped by 7.2%.
Simultaneously, the positive impact of new market launches will support growth in 2024.
Factors Influencing VW Stock Performance
Let’s look at the factors influencing VW’s stock performance, which range from internal company dynamics to external market conditions.
Industry Trends:
Like the rest of the automotive industry, Volkswagen faces great competition, and its stock performance is closely connected to the market trends within the automotive industry. Whenever there are shifts in customer preferences, like increased demand for EVs or SUVs, it impacts VW’s sales and shares.
Other regulatory changes as per emission standards and fuel efficiency can affect the production cost of the vehicle, directly influencing the profitability.
Market Competition:
Market competition is one of the significant factors contributing to the prices and performance of any automotive stocks. Being one of the largest automotive makers, Volkswagen faces massive competition from other manufacturers. Toyota, General Motors, Ford, and BMW are the biggest competitors. They influence the price strategy, product offering, and market trends.
Toyota is tough competition in terms of its increasing market share and stock performance, and Tesla in terms of the EV market.
New product launches, pricing wars, and market share can impact the market and stock performance. Let’s look at some strong competitors of VW:
- Toyota (TM)
- Tesla (TSLA)
- General Motors (GM)
- Stellantis (STLA)
Macroeconomic Conditions
The economy is fundamental in influencing the market; economic condition plays a significant role in impacting the performance of stocks. GDP growth, inflation, interest rates, employment levels, and currency exchange rates are essential Macroeconomic factors.
GDP growth: Economic activities are directly related to the country’s development. As GDP increases, the tendency of customers to spend on automobiles increases. Strong GDP growth helps manufacturers vouch for higher sales volume and revenue that directly and positively impacts stock prices and performance.
Inflation: A moderate level of inflation means a positive sign for the country, indicating a growing economy with consumer demand. But, at the same time, a higher inflation rate can erode consumers’ purchasing power and lead to higher production costs, impacting stock prices negatively.
Interest Rates: The interest rate is directly connected to inflation as a lower interest rate increases purchasing power, and a higher interest rate decreases the purchases.
Since all these macroeconomic factors play an essential role in deciding the country’s economic condition, making stock prices go up and down.
Ways to Buy Volkswagen Stock.
VW aims to match Tesla in terms of its sales and surpass it by 2025 with plans to reduce battery costs to open six gigafactories in Europe by 2030. With the selling of VW’s new SUV, the ID.4, across Europe, China, and the US, has also released plans to launch the series of compact SUVs by 2025, lifting the possibility of rising sales and revenue with increased stock valuation.
However, when you search for VW stock, you encounter over 20 ticket symbols, and these ticket symbols fall into three categories that confuse you. Any financial decision should not be made with a confused mind. So, there are three ways you can buy VW stock.
Porsche Holding Co
Porsche Automobile Holding Co is a holding company that owns 53.3% of Volkswagen shares. Porsche shares can be one ticker to get in on Volkswagon and Porsche’s holdings. However, this hasn’t hit any height in VW’s share prices due to the lack of knowledge among investors.
Ordinary Shares (VWAGY)
Volkswagen’s ordinary shares give its shareholders the right to vote at the company’s AGM. These shares are less liquid than the other two owned shares of VW and are mostly owned by investors for the long term. However, over the past few years, VWAGY has experienced a decline in performance.
Preference Shares
Volkswagon’s preference shares have always been traded in more significant volumes than their ordinary shares and are more liquid. However, these shares do not have voting rights, but they get a preference when there is any event or issue within the company, such as paying dividends to shareholders.
Which VW Stock to Buy?
When looking at the VWAGY, there is a noticeable decline of 25% from January 2021 to $15 now. Returns for the stock were 40% in 2021, -46% in 2022, and -17% in 2023. In comparison, returns for the S&P 500 were 27% in 2021, -19% in 2022, and 24% in 2023, meaning VWAGY is underperforming. Considering VW’s stocks’ current rise and fall dynamic, you can go for something that gives you a specific fixed dividend.
If you plan to buy Volkswagon shares, preference shares can be best based on liquidity and history of volume purchases. The primary advantage you will get is having a fixed dividend. Investing in preference shares gives you priority over VW’s income, meaning preference shares are paid dividends.
Conclusion
Investing in Volkswagen stocks offers you the opportunity to experience VW’s growth. By evaluating factors, you can make your decision smartly. Whether investing in preference shares or ordinary shares, you must do a thorough market analysis of the company’s performance.
Peter Williams, a financial writer with over five years of experience, specializes in covering stock market movements, bond markets, commodities, and macroeconomic trends.
