Investing.com -- Volkswagen AG was upgraded to “outperform” by RBC Capital Markets following investor meetings in the U.S., Canada, and at RBC’s Global Industrials Conference, in a note dated Tuesday.
Shares of the German carmaker were up 2.4% at 05:47 ET (9:47 GMT).
Analysts cited the automaker’s relative resilience against U.S. tariffs, improving performance in China, and ongoing cost-cutting at its core brands as key factors behind the upgrade.
VW appears better positioned than other German automakers to weather U.S. tariffs. The company’s North American production is heavily weighted toward Mexico, with 287,000 vehicles imported to the U.S. in 2024, representing nearly 40% of its import value.
RBC expects the effective tariff rate could be “closer to 6-7% due to carve-outs for USMCA-qualifying goods and U.S. content requirements.”
VW also plans “massive” investments in the U.S. to reduce its tariff exposure. Analysts estimate that assuming a 10% effective tariff, VW could see a roughly €3.2B improvement in operating results, compared with a €4.8B decline under a sustained 27.5% tariff.
In China, VW’s deliveries grew 2.8% year-over-year in Q2, marking the first positive growth since Q1 2024, driven largely by non-BEV vehicles.
Non-BEVs accounted for approximately 95% of deliveries, rising 5.7% to 636,300 units, while BEVs fell 32.7% to 33,400 units.
Management expects equity income from its China joint venture of roughly €1 billion in 2025, down from €2.6 billion in 2023.
Analysts noted that VW’s “in China, for China” initiative, which includes 50 new model launches by 2030 with over 20 NEVs, and partnerships with XPeng and Horizon, could drive future growth.
VW’s core brands showed signs of recovery. Skoda reported 306,000 deliveries, up 9.3% year-over-year, with a record profit margin of 9.5%.
VW Passenger Cars posted a 4.5% profit margin in Q2. Analysts attributed improvements to cost-cutting measures, including a reduction of 4,300 headcount in H1 2025, material cost reductions on the Compact Main Platform by 40%, and a one-off license payment acceleration in China.
At IAA Mobility 2025, VW introduced the ID.CROSS Concept, ID.Polo (and ID.Polo GTI), ID.EVERY1, and T-Roc, emphasizing affordable electric vehicles.
RBC raised its price target to €130 per share, incorporating €5 per share from China and €11 per share from the expected 2026 sale of MAN Energy Solutions (now Everllence).
The base target of €114 per share excludes China. Analysts said the recent P911 impairment and share price pullback “has largely derisked the downside.” Upside and downside scenarios were set at €168 and €37 per share, respectively.
VW’s electrification plans remain aggressive. The company operates six battery cell-making facilities in Europe, each with 40 GWh capacity, enough for 4 million BEVs, exceeding its 2030 European target of 2.5 million vehicles.
In China, VW has secured 150 GWh of battery capacity to support its 2.5 million vehicle target through 2025.
