It looks like a strong catch-up if it weren’t for the energy costs and the risk of being left behind in China. At the start of the year, the VW Group only made up limited ground.
The VW Group continues to brace itself against strong price fluctuations for raw materials and growing competition in China – but has been able to increase its current business overall without these burdens. Operating profit grew 35 percent in the first quarter to about 7.1 billion euros, excluding the valuation of hedging transactions in the purchase of materials. If you take them into account, the picture looks different: Operating profit fell by 31 percent to 5.7 billion euros, and the bottom line was 4.7 billion euros after 6.7 billion euros at the beginning of 2022.
As the company reported on Thursday, the situation has stabilized somewhat despite persistent delivery problems in the automotive electronics sector. Sales rose by almost 22 percent to 76 billion euros. The fact that many vehicle models became more expensive as part of the general inflation may have played a role – the Wolfsburg spoke of “improved price positioning”.
Sales recovered particularly in Europe and North America, while the VW Group in China had significant problems. CFO Arno Antlitz nevertheless sees a “promising start to the 2023 financial year” and a “solid performance”.
The effects of cushioning increased procurement costs for basic resources and energy (“hedging”) were still positive in the first quarter of 2022 at 3.2 billion euros. Now this turned into the opposite in the books. Details on this were not reported, and VW also had to adjust some values afterwards.
Delivery picks up
Because of the restrictions on world trade, especially in the high phase of the Corona period, there was a violent crash in the supply chains of the automotive industry. The situation has eased somewhat recently. Although VW admitted “persistent impairments” – nevertheless, the weak deliveries from the start of the previous year were improved by a total of 7.5 percent to 2,041,000 cars. Production also picked up again after a production backlog had built up over the past two years due to supply bottlenecks for microchips and raw materials.
The group fell short of expectations in China, the most important market by far. Sales there fell by 14.5 percent from January to March, and even more for e-cars. For the first time in decades, the core brand VW passenger cars lost its market leadership to the local electric rival BYD. The Germans recently lacked software and entertainment functions that meet the taste of young customers.
Now the aim is to counteract this with new models and investments. “The group is confident that deliveries will recover over the course of the year due to the expanded range and China-specific technology,” it said officially.
Small proportion of pure electric cars
The business with pure electric cars grew worldwide, for the first quarter the group reported an increase of 42 percent to around 141,000 units. The proportion of all deliveries is steadily increasing, but at a good 7 percent it is still comparatively low overall.
According to experts, VW has to catch up in the development of self-programmed software. There were major delays here – and contrary to original plans, the luxury class subsidiaries Porsche and Audi are going their own way for the time being. The start of the future car Trinity planned by the core brand, including its own electronics platform, has been postponed. It is also unclear whether a new plant will be needed for this.
The software division Cariad slightly increased its loss in the first quarter compared to the same period last year from 416 to 429 million euros. The group referred to the high investment requirements. VW has planned billions for its battery cell plants in Europe and Canada.
The “Premium brand group” with Audi fell behind in the operating result compared to the first three months of 2022, after 3.5 billion euros then, it now comes to 1.8 billion euros. However, the Ingolstadt company recorded an increase in sales. According to the latest figures, the “Volume brand group”, which includes the core brand VW passenger cars, improved its operating profit from almost 880 million to 1.7 billion euros. Porsche was also able to sell significantly more.
The group left its outlook for 2023 unchanged. So far, he has been calculating with an increase in sales of 10 to 15 percent. Thanks to the full order books, the Wolfsburg-based company expects a significant increase in deliveries to around 9.5 million vehicles (previous year: 8.3 million). However, US competitor Tesla is not only speeding things up with its new plant on the outskirts of Berlin, but is also putting pressure on its competitors with price cuts.