00:00 Speaker A

Walk us through this decision.

00:01 Pras Subramanian

Yeah, you know, it’s crisis time there at Volkswagen. Profit has been tumbling as costs, you mentioned Chinese competition and waning EV demand at the automaker. So sales performance this quarter wasn’t very good down around down to 2.1 million vehicles globally. Uh it’s down 8.6% from a year ago. China deliveries plunged 36.6%. Local market contracting there, Chinese rivals gaining ground. And then global EV sales slid 4.2% to, you know, a healthy 238,000 vehicles, but

00:30 Pras Subramanian

in the US that was down 50%. So,

00:33 Pras Subramanian

what are they going to do? And among a number of things that Oliver Bloom, the CEO came up with the plan dubbed the future plan, uh, they’re going to cut those models down by half. Now this is VW operates models from both Volkswagen, Audi, Skoda, Lamborghini among others.

00:47 Speaker A

These really high-end brands.

00:48 Pras Subramanian

Some of them are, some of them are, yeah. Uh 120 models globally. Half of those will likely be gone, certain trim levels will be gone. Making the company simpler, uh leaner. I think that’ll help them with the cost side, but the question is, you get good on the costs, but does it really help boost sales? Does it help you compete against the Chinese? Does it help with the EV demand situation in this country? That remains to be seen.

01:06 Speaker A

So, as they try to navigate all this, is there is there a certain brand within their portfolio that maybe they would potentially think about getting rid of?

01:13 Pras Subramanian

I mean, if you need to raise cash, you probably think about selling off some assets. And they did that with Porsche a couple years ago. a different story there because Porsche family owns a lot of Volkswagen and it was a kind of an intermixed thing and then they spun out Porsche, made made good money. The the stock of Porsche is not doing too well recently, but it was still a a good thing to spin out. So, looking at other brands here, I I think Lamborghini and Ducati, the the motorcycle maker were the the two biggest, most rumored about spin-offs. Definitely, you know, three, four years ago it was it was like they was preparing supposedly to do this. They didn’t do it. and now maybe they might do that just to raise cash. Maybe even Bentley, we’ll see.

01:52 Speaker A

Okay. Is this like compared to anything else we’ve seen in the industry before?

01:55 Pras Subramanian

You know, you saw Ferrari. This is a very unique example. Ferrari was part of the Stelantis Fiat Empire.

02:00 Speaker A

Right.

02:01 Pras Subramanian

They spun that out very successfully. Ferrari’s worth way more than Stelantis now. But that was that’s a unique case because Ferrari is a is a huge name in in in this in the industry. So maybe Lamborghini can get some some some good you know, they they have comparable sales but it’s just not the same brand value as Ferrari.

02:18 Speaker A

Right. Okay. So maybe setting a precedent, but maybe it won’t be as quite as successful.

02:22 Pras Subramanian

Yeah, but it could it could be successful in the sense that it just helps them raise some money.

02:26 Speaker A

Right. All right. Pras Subramanian, thanks for bringing it down. Appreciate it.