VW Raises Profits As The Industry Worries About Its Future.
“The Volkswagen Group could set new records for 2019 as a whole in sales and operating (financial) results,”
Volkswagen shares rose slightly as the European 600 automotive industry index slid nearly 1%, after Europe’s biggest carmaker as measure by sales reported strong 2nd quarter profits.
The positive financial report belied much negative sentiment surrounding the industry, as it faces weakening sales around the world, tariff controversies, and the increasingly prohibitive cost of new technology like electric cars, and computer driven ones.
VW has also had to face down the massively expensive “dieselgate” controversy.
VW said 2nd quarter net profit rose to 3.9 billion euros ($4.3 billion) from 3.2 billion euros ($3.6 billion) in the same period of 2018, boosted by strong sales of VW brand small SUVs like the T-Roc and T-Cross. Porsche, with an 18.4% profit margin and Skoda brands (7.9%) reported strong profits, while Audi performed better than expected at 8%, which also compared well with rivals Mercedes and BMW.
VW’s financial performance compares with premium carmakers like Daimler’s Mercedes which reported a loss for the quarter last week, and BMW, where profit margins are under pressure. VW sells mass market cars under its own brand, as well as Skoda and SEAT. Its premium brands include Audi, Porsche, Bentley and Lamborghini
Citi Research said VW is its preferred German auto stock, as it benefits from an improving SUV portfolio, and an ongoing cost cutting program. Citi Research also reckons VW’s costly electrification plan will be a long-term winner.
VW’s improved profits came despite slightly lower vehicles sales in the first half of 2019, which fell 2.8% to 5.4 million.
Investment bank Nord LB said despite this, the second half of 2019 looks promising.
“The Volkswagen Group could set new records for 2019 as a whole in sales and operating (financial) results,” Nord LB said in a report.