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Prospects confirmed: VW share still in the red: Volkswagen records a strong first quarter | news

A strong first quarter, in which sales increased slightly despite significantly lower vehicle sales, makes the Wolfsburg DAX group optimistic. As already known, the operating margin almost doubled thanks to the special effects.

In the first three months, Volkswagen recorded a slight increase in sales of 0.6% to 62.74 billion euros with a decrease in sales of a fifth. As already known from the presentation of key figures in mid-April, the operating result rose to 8.5 billion from 4.8 billion euros. The operating margin even rose to 13.5 from 7.7 percent. The reason for the rapid rise is the high inflows of financial instruments with which VW hedged against rising commodity prices. The group paid much less for the raw materials than is currently the case on the market, which is why there was a high accounting profit. According to more information on Wednesday, after tax, VW doubled its profit to 6.72 billion euros.

For the full year, VW continues to expect an operational return on sales of between 7.0 and 8.5%. Sales are expected to increase by 8 to 13 percent and deliveries by 5 to 10 percent. VW expects an improved range of semiconductors in the second half of the year. However, this prediction depends on the further course of the war in Ukraine and the further course of the crown pandemic with its effects on businesses and the global economy.

The Volkswagen core brand confirms the margin target for 2023

Despite the rising costs and ongoing burdens of the pandemic, Volkswagen expects significantly better profitability for its core brand next year. “We are (…) sticking to our target of 6% operational return on sales in 2023,” Volkswagen CFO Alexander Seitz said in the first quarter results statement. However, the forecast depends on the further course of the war in Ukraine and the impact on the global economy.

Currently, the demand for both combustion engines and electric cars is “very unchanged”. The order book for all transmission types reached an all-time high of over 670,000 vehicles in Europe.

According to the announcement, the VW brand generated an adjusted operating return on sales of 3.4 percent in the first quarter, an improvement from the previous year’s 2.8 percent figure. While sales fell 15% to € 14.9 billion due to declining auto sales, adjusted operating income rose 5% to € 513 million, also thanks to good selling prices.

As before, VW did not provide a specific forecast for 2022. Last year, the Wolfsburg-based group achieved an adjusted return of 3.3% with its main brand.

The head of VW Diess: Expansion in the United States with a focus on electric cars

The Volkswagen Group intends to support its planned expansion in the United States primarily by expanding the production of electric cars. Initially, production at the current US plant in Chattanooga is expected to more or less double, VW chief Herbert Diess said Wednesday. The Wolfsburg-based company operates the factory in the US state of Tennessee with a reduced load and a capacity of 150,000 to 200,000 cars per year, like “half a factory,” so to speak, as Diess said at a press conference. To start up the plant, an expansion of the paint shop and, for example, of the body shop is necessary.

“Of course, expanding capacity in Chattanooga alone is not enough to get close to the 10% market share target,” the manager said. “So we are definitely thinking about additional capacity, but it has not yet been decided whether it will be in the United States or Mexico, most likely the United States.”

“The focus will clearly be on electric cars – we see this as a historic opportunity to gain market share in the US,” Diess said. The VW boss has long set himself the goal of attacking the important North American sales market again after the diesel debacle with illegally cut exhaust values. More recently, midsize urban off-road vehicles (SUVs) such as the Atlas and Tiguan have been able to revert to operational black figures in the United States. Production of the fully electric ID.4 will begin on site this year.

Despite recent successes, VW continues to lag behind Japanese mass producers such as Toyota, Honda and Nissan, which have been successful in the US market for many years, as well as large US companies. Leading passenger car brand VW sold 375,030 cars in the US last year, a good 15% more than the previous year 2020, which was heavily hit by the crown. The entire US auto market was a whopping 14. 9 million cars and light commercial vehicles last year – the So VW brand alone had a market share of around 2.5 percent.

VW CFO: high commodity price burden, more software money

VW CFO Arno Antlitz sees further additional costs for the group due to this year’s huge energy and commodity inflation. “However, we cannot yet quantify more precisely how high this burden will be,” he told the German news agency and the dpa-AFX news agency on Wednesday of the current estimates for the purchase of raw materials.

In the case of energy, however, the price increase for the Volkswagen Group plays a “subordinate role”. Because here they are trying to absorb the additional expenses, by the way, through the savings programs that are running at the same time. Furthermore, VW continues to rely on hedging operations against excessively strong price fluctuations.

In 2021 the group reduced fixed costs from 23 to 19 billion euros. “The goal is to keep the level this year,” Antlitz said. Leading brand VW Passenger Cars plans to reduce fixed costs by 5% by 2023 as part of existing programs.

The price level of new and used cars is also currently high. On the one hand, the shortage of supply following the chip crisis comes into play, on the other hand manufacturers often divert the remaining quantities of semiconductors to more profitable luxury cars. It is not yet possible to give a precise figure on how strongly any further price increases for energy and raw materials will affect the prices of end customers. Automotive supplier Continental expects approximately € 3.5 billion in additional expenses this year.

Regardless of the uncertainties related to the war in Ukraine and the new coronavirus lockdowns in China, VW also wants to invest more in its Cariad software division. “This year we are allocating around 3 billion euros to Cariad, which can increase again next year,” Antlitz said. Losses increased by a further 222 million euros in the first quarter, but this is mainly due to the necessary start-up financing.

“Cariad later makes its money with brands paying royalties,” VW’s CFO said. “Currently, we still have to pay advances for the development of our three main software packages, which are still on average around 2.5 billion euros per year.” Once the platforms, which are also being developed for Audi, for example, are finished, there will be corresponding returns. CEO Herbert Diess predicts Cariad will likely be profitable around 2026.

VW’s share initially rose via XETRA, but slipped to red over the course of the year. It eventually dropped 1.12 percent to € 148.52.

FRANKFURT (Dow Jones) / WOLFSBURG (dpa-AFX)

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