Thursday, May 06, 2021
Historically good start to the year
Volkswagen makes a big leap in profit
A significant increase in vehicle sales, including e-cars, gives Volkswagen an unexpectedly strong start to the year. The recovery in China in particular is contributing to this. The bottom line is that the car company has a profit of 3.4 billion euros. VW is therefore increasing its return expectations for the current year.
Despite the global shortage of chips in the midst of the pandemic, Volkswagen had one of the best first quarters in its history. The Group’s operating profit quintupled at the beginning of the year to 4.8 billion euros, as the Wolfsburg-based company announced on Thursday. The bottom line was 3.4 billion euros. The world’s second largest auto company then raised its outlook for the full year. Instead of an operating return at the upper end of the range between 5 and 6.5 percent, as previously forecast, up to 7 percent are now promised.
“We started the year with a lot of momentum and are operating well,” said CEO Herbert Diess. The e-car offensive continues to gain momentum and Volkswagen is making good progress with the transformation. “A lot can be expected from us in the further course of the year.” The shortage of computer chips did not have such a strong impact in the first quarter. In the current second quarter, the bottleneck will probably “have somewhat more significant effects than before,” said Group CFO Arno Antlitz. Nevertheless, Volkswagen is confident of further business development.
The strong start to the year was mainly due to the rapid recovery in China, where deliveries climbed by 61 percent after the standstill at the beginning of last year.
A fifth more vehicles than a year ago
Worldwide, Volkswagen delivered 2.4 million vehicles between January and March, a fifth more than a year earlier. Sales of e-cars doubled to around 133,300. Above all, the earnings pillars Porsche and Audi increased their deliveries significantly. The robust business also boosted the inflow of funds. In terms of net cash flow, the group more than doubled the first quarter of the pre-crisis year 2019 at EUR 4.7 billion. The liquidity in the auto business improved by two thirds compared to the previous year to 29.65 billion euros.
Due to the lack of chips, Volkswagen has had to stop the production lines and register short-time work several times in the past few weeks. Most manufacturers around the world are affected by the bottlenecks in electronic components because after the outbreak of the Corona crisis, chip suppliers primarily serve computer manufacturers and providers of entertainment electronics. When demand for cars recovered faster than expected at the end of last year and the automotive industry urgently needed chips, a lot of capacities were already taken. It could take until next year for the supply of computer components to go smoothly again.
Six battery cell giant factories planned
Thanks to the good liquidity, the ambitious investment plans for the conversion of Volkswagen into a mobility company that offers not only electric cars but also self-driving vehicles and related services should be secured for the time being. By the end of the decade, Volkswagen plans to have six gigafactories in Europe for the construction of battery cells. According to experts, that alone should cost at least twelve billion euros.
In addition, the Lower Saxony are driving the development of software for robot cars, want to develop the necessary high-performance chips themselves and are getting into climate-friendly energy generation. All of this will devour a lot of money in the next few years, which should not be raised without further savings.
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