Stuart Mitchell of S. W. Mitchell Capital presented his investment thesis on Volkswagen (Germany: VOW, VOW3) at European Investing Summit 2025.
Thesis Summary
Volkswagen is a controversial, deep-value investment. VW is the world’s second-largest car maker, with a 9% market share, and the leading manufacturer in Europe with 23% share. The group’s portfolio spans from mass-market Skoda (8% operating margin) to luxury Porsche (15% operating margin). A long-standing challenge has been the core VW auto brand, which, despite its volume, earns only a 2% operating margin.
The investment thesis rests on management addressing three main challenges that have caused the share price to fall to the low 90s. The first challenge is China, where VW has a 20% share in internal combustion engines (ICE) but only 4% in battery electric vehicles (BEVs). Stuart argues that VW is responding effectively by introducing the ‘China Main Platform’ to cut production costs by 40% and creating the Volkswagen China Technology Company to develop software localized for Chinese consumers. A joint venture with XPENG will also provide a low-cost platform for Audi.
The second challenge is European profitability. Stuart points to a deep restructuring plan (‘Zukunft Volkswagen’) agreed upon in December 2024. This plan includes cutting 35,000 German jobs (25% of German capacity), reducing Wolfsburg capacity from four lines to two, and suspending a 5% wage increase until 2030. This contributes to a total cost-saving target of €15 billion. The third challenge, technology, Stuart believes is “more imagined than real,” arguing VW’s pragmatic “make and buy” approach, including JVs with Rivian and XPENG, is narrowing any perceived gap.
Stuart presents a sum-of-the-parts (SOTP) valuation to highlight the disconnect, with the stock recently trading near €92. A conservative SOTP analysis values the high-end Porsche models (911, Panamera) at 10x EV/EBIT and the mid-level luxury brands (Audi, Lamborghini, and the rest of Porsche) at 4x EV/EBIT. This SOTP, which also includes the truck and financial services divisions, plus €40 billion in industrial net cash, less pensions and minorities, results in a value per share of €313. Stuart notes this 10x multiple for Porsche is a fraction of Ferrari’s. If the restructuring is executed, he also projects the business could trade on 1.5x 2027 earnings.
Disclaimer
European Investing Summit 2025 was held from October 28 to November 3, 2025. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
Slides
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