Equity anlaysis

: VW Group's positioning in the Automotive Industry

Abstract

This study presents a comprehensive analysis of the VW Group including all of its asset holdings and brand subsidiaries. I consider the crucial valuation methods, and measure their relevance to valuation of VW’s different brands in light of academic literary foundations. By considering a range of different automaker strategies I examine how manufacturing scale, flexibility and efficiency are set to be the key determinants of success. I scrutinize the key drivers of revenue and costs for all of the VW brands, and analyse their respective exposures in different geographies. On geographical exposure, whilst VW’s high market share is fairly mature, the US presents an interesting opportunity for the brand where capacity is increasing. Equally VW holds a compelling position in Emerging Markets such as China and Brazil; models such as the Porsche Macan under the VW Group are gaining traction and pricing power there. I value VW by Sum of the Parts, considering relative, DDM, FCFF and Dupont valuation methods as appropriate, and compare my findings to a number of investment banks. There are indeed a number of downside risks, namely the pricing pressure in Europe from low cost entries, the temporally increased cost base from the MQB launch and FX changes that have increased competition from Japan OEMs. However, VW Group does still present a compelling opportunity for investors to gain access to the automotive market. VW is well diversified both from a brand and geographical perspective, well capitalized, and is set to benefit from longer term efficiencies with the MQB platform.

Date of Award	2014
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)