Volkswagen dropped from Euro Stoxx 50 as shares tumble 75% from peak

Volkswagen has been dropped from the Euro Stoxx 50, Europe's benchmark blue-chip index, for the first time in 15 years. The German automaker's share price has fallen more than 75% from its 2021 peak, and its market cap has shrunk to around 38 billion euros ($43.5 billion). The removal underscores a broader reshuffling of market cap rankings among traditional automakers as the industry contends with the electric vehicle transition and intensifying competition in China.

According to Investing.com, Volkswagen's market cap stood at roughly 38 billion euros as of Tuesday. The company posted annual sales of 322 billion euros last year, meaning its market cap now amounts to just one-eighth of its revenue.

Profitability has deteriorated sharply. Volkswagen's sales for the first half of this year came in at 158.1 billion euros, roughly flat from a year earlier, but operating profit fell 11.6% to 5.9 billion euros, leaving an operating margin of 3.8%. Vehicle deliveries dropped 8.4% to about 4 million units, while sales in China slid 20%.

The profitability outlook has also dimmed. On Friday, Volkswagen cut its full-year operating margin guidance to a maximum of 1%, down from a previous range of 4 percent to 5.5 percent, citing expected one-time charges of around 10 billion euros this year — including roughly 6 billion euros in impairment losses related to Porsche. Weak performance in China, costs tied to the EV transition and restructuring burdens were also factored in. Volkswagen shares fell 5.6 percent that day.

The company is also pressing ahead with restructuring, cutting headcount and streamlining production facilities to reduce costs. Markets are watching closely to see whether those savings translate into a recovery in profitability. On Monday, shares slipped a further 1.1 percent following news of the Euro Stoxx 50 exclusion. Ferrari, BMW and Mercedes-Benz are the only automakers remaining in the index.

Simon Jäger, a portfolio manager at German asset manager Flossbach von Storch, said the share price and market cap trends show "how skeptically investors view Volkswagen." Michael Tyndall, an automotive analyst at HSBC, described the broader auto sector as "depressed by the risks it faces."

The relative decline in automakers' market cap rankings is not confined to Europe. In Japan and South Korea, large-cap companies from other industries have also been overtaking automakers in market value.

In Japan, Toyota has ceded the top spot in market capitalization this year to SoftBank, Kioxia and Mitsubishi UFJ Financial Group in succession. As of Friday, Toyota had reclaimed first place with a market cap of 44.1 trillion yen ($280 billion), but four companies trading the top ranking in a single year marks the first such occurrence since 1980. SoftBank's rise was driven by AI investment, Kioxia's by demand for memory chips used in AI data centers, and Mitsubishi UFJ's by a rerating of bank stocks amid rising interest rates. Akino Mitsushige, president of Ichiyoshi Asset Management, said the trend is "not evidence that Toyota's competitiveness has weakened, but proof that new industrial 'shoots' are growing."

In South Korea, Hyundai Motor has also slipped in the Kospi market cap rankings as semiconductor and AI-related large caps have expanded rapidly. Hyundai Motor started the year ranked sixth by market cap on the Kospi, briefly climbed to third earlier this year, but has since fallen back to seventh. Its market cap itself, however, has not shrunk — it rose from around 60 trillion won ($44.1 billion) at the start of the year to roughly 70 trillion won more recently. The relative slide reflects the faster pace of market cap growth at other large caps, including Samsung Electronics, SK hynix, Samsung Electronics preferred shares, SK Square, Samsung Electro-Mechanics and LG Energy Solution.

kacew@heraldcorp.com