DAX 40-listed Volkswagen AG (DE:VOW) is navigating the supply challenges on the Red Sea by redirecting ships to guarantee a continuous supply of its auto parts instead of temporarily halting production like some of its peers. Since last month, Volkswagen has started rerouting its car parts shipments around South Africa instead of using the Suez Canal. However, this change has led to a delivery delay of two weeks for the company.
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The Red Sea Disruption
The Suez Canal is a waterway connecting the Red Sea to the Mediterranean Sea and the most direct and important shipping route between Europe and Asia. Following the outbreak of the Israel-Hamas conflict, Houthi rebels have claimed responsibility for multiple attacks, calling them acts of revenge against Israel.
In a recent update, Reuters reported that EV giant Tesla (NASDAQ:TSLA) intends to temporarily halt production at its factory near Berlin due to component shortages caused by attacks on vessels in the Red Sea. Similarly, the disruption forced Volvo Car, which is majority-owned by China’s Geely Automobile Holdings Ltd. (HK:0175), to halt production at its Belgian plant for a few days.
Volkswagen: Strategically Addressing Supply Issues
In 2023, Volkswagen suffered significant supply chain issues, including semiconductor shortages and transportation delays. This forced the company to reduce its annual delivery target, impacting its margins and profitability. However, the supply chain issues eased out in the second half of 2023. The stock fell by around 26% in 2023.
For the full year 2023, Volkswagen’s deliveries increased 12% to 9.24 million vehicles. Despite the ongoing challenges, the company assured investors about continued momentum this year, backed by the launch of new models.
Volkswagen is scheduled to release its annual results for 2023 on March 13, 2024. The company expects its revenue to be 10% to 15% higher than the figure reported in 2022.
Is Volkswagen a Good Stock to Buy Now?
According to TipRanks’ consensus, VOW stock has received a Moderate Buy rating based on recommendations from nine analysts. This includes six Buy and three Hold recommendations. The Volkswagen share price forecast is €138.63, which is 16% higher than the current price level.
