Volkswagen Could Sell Lamborghini and Ducati Brands – Report
by Satya Singh · RushLaneWhile Volkswagen needs billions to restructure its core business, many experts believe that selling profitable ventures may not be the appropriate strategy
Ranked as the world’s second largest carmaker, Volkswagen is carrying out a massive restructuring exercise. This is aimed at securing the future of its core mass-market business. Speculative reports suggest that all options could be on the table, including the potential sale of crown jewels such as Lamborghini and Ducati. An IPO route could also be considered for Lamborghini, allowing Volkswagen to generate cash, while still retaining a majority stake. However, an official confirmation has not been provided.
High cost of restructuring
Both Lamborghini and Ducati are highly profitable businesses that offer strong growth potential. Despite the ongoing tariff issue, Lamborghini generated profits worth $888 million (Rs 8,450 crore) last year. Volkswagen owns various brands and Lamborghini is one of its crown jewels. Experts are divided on whether VW should go ahead and sell these prestigious brands.
If a sale or IPO comes through, it could be forced due to practical reasons. The cost of restructuring is quite high for Volkswagen, which may prompt some major decisions. There are plans to close down four factories in Germany and cut around 100,000 jobs. This will require billions to be paid in severance and early retirement payouts.
The cost of litigation related to the restructuring is also expected to be significant. VW’s restructuring exercise is already underway, as recently seen with the sale of Everllence. Volkswagen has sold a majority stake in the company. Everllence specializes in manufacturing large two-stroke and four-stroke marine engines.
It remains to be seen if there are similar plans for Lamborghini and Ducati. Both these brands can generate significant cash, as their valuation estimates are around $22 billion and $2 billion, respectively. An IPO route for Lamborghini could probably work better. This strategy has already been used successfully with Ferrari, when it went public in 2015.
Challenges for VW
Volkswagen is facing multiple challenges, which have led to the current situation. One of the major threats is from Chinese car brands such as BYD, Geely and Changan. Interestingly, China has been a huge market for Volkswagen, where the brand has dominated by forming joint ventures with local manufacturers. However, the dynamics have changed now, with Volkswagen being challenged by Chinese brands in both China and Europe.
An aggressive pricing strategy followed by Chinese brands has been a major challenge for European carmakers. Another factor impacting Volkswagen’s growth is the plateauing of EV sales globally. Volkswagen has invested significant amounts for the EV transition and still needs funds to power its future EV journey. Funds will be needed for developing the next-generation EV platforms, software and battery technology.
Will Lamborghini, Ducati go on sale?
While Volkswagen may be exploring all available options, it is unlikely that profitable brands like Lamborghini and Ducati will be put up for outright sale. Selling these crown jewels will mean losing reliable, high-margin revenue streams. Moreover, since brands like Lamborghini are heavily dependent on Volkswagen’s ecosystem, moving to a new owner will bring its own set of challenges. As mentioned earlier, a more balanced option could be the IPO route.