Volkswagen Group posts heavy losses but still expects 2020 profit

Pandemic causes an 81.4% fall in operating profits, but manufacturing giant is returning to full-scale production.

The Volkswagen Group has suffered an 81.4% drop in operating profits as a result of the coronavirus crisis – but still expects to achieve a positive operating profit in 2020.

The manufactuing group’s total of two million deliveries in the first quarter of 2020 was down 23% from the same period last year, with sales revenue slipping 8.3% to €55.1 billion (AUD$94.1 billion) from January to March.

Overall, the Volkswagen Group sold 765,000 passenger cars from January to March, down from 910,000 in the first quarter of 2019.

The decline – most profoundly felt in Europe and East Asia – is attributed to a “drop in customer demand” in the run-up to the universal industry shutdown brought about by the pandemic.

On 17 March, the Volkswagen Group gradually wound down its European manufacturing operations in light of a “significant deterioration in sales” and “uncertainty over plants supplies”.

As a result, the firm expects its deliveries to customers in 2020 to fall significantly short of its 2019 numbers, with additional challenges including intensified competition, volatile markets and new emissions legislation coming into effect as the pandemic recedes.

It notes that sales of certain models – namely the Volkswagen Passat, Volkswagen T-Cross and Audi E-tron – achieved consistently strong sales in the period, but this was unable to counterbalance the effects of weakening overall demand, emissions-related expenses and varying exchange rates.

Chief financial officer Frank Witter said: “The global Covid-19 pandemic substantially impacted our business in the first quarter. We’ve taken numerous countermeasures to cut costs and ensure liquidity and we continue to be robustly positioned financially.

“The gradual restart, also of our factories outside of China, has begun. The health of our employees and suppliers remains the clear priority here. In Germany, the dealers have reopened since last week. We have thus taken initial steps together to get the business up and running again.

“The Volkswagen Group is steering through this unprecedented crisis with focus and determination.”

Felix Page

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