Wolfsburg Despite the economic turbulence caused by the war in Ukraine and rising costs, Volkswagen is sticking to its outlook for the current year. Europe’s largest car company confirmed its forecast when presenting the quarterly balance sheet on Wednesday, according to which sales in 2022 should increase by eight to 13 percent and the operating return should be in a range between seven and 8.5 percent.
“In the first quarter, our group once again demonstrated great resilience despite the unprecedented challenges the world is facing as a result of the terrible war in Ukraine and the ongoing pandemic with its effects on supply chains,” said VW Group CEO Herbert Diess.
In the first quarter, it was possible to largely cushion the bottlenecks in semiconductors and cable harnesses by redistributing the sources of supply between the large markets in Europe, China and North and South America. Even in a world that has become increasingly polarized by the war, the car company is determined to expand its global presence and to further advance its transformation into a sustainable and fully digital mobility provider.
Based on initial estimates for the first quarter, Volkswagen surprised three weeks ago with an operating profit before special items of around 8.5 billion euros. The Wolfsburg-based company benefited massively from financial instruments with which they secured themselves against the rise in raw material prices.
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The operating return almost doubled in the first quarter to 13.5 (previous year 7.7) percent. The car company had not mentioned the outlook at the time, but had already warned of risks from the war in Ukraine and the ongoing corona pandemic.
The bottom line was a net profit of 6.7 billion euros in the period from January to March, almost twice as much as in the same quarter of the previous year. Volkswagen made up for the drop in deliveries by a fifth to almost 1.9 million vehicles by selling more expensive vehicles. Sales increased marginally to 62.7 billion euros.
However, the supply of microchips and various basic resources continues to falter, and the situation has worsened since the Russian attack on Ukraine at the end of February. And in the most important single market, China, new tough corona restrictions meant that the production lines at VW had to stand still for a long time. Additional production stops are imminent.
In addition, energy costs more and more. “The danger for Europe is huge,” said CEO Herbert Diess at an event organized by the “Wolfsburger Allgemeine Zeitung” and “Wolfsburger Nachrichten”. “The inflation that this creates can destabilize Europe.”
Sales figures are falling – especially in China
Despite high demand, the VW Group was only able to deliver 1.9 million vehicles worldwide in the first quarter, a good fifth less than a year ago. In China, there was a drop in sales of 23.9 percent. Decreasing the overall number of cars and diverting remaining electronics into full-size and e-models is keeping profits up so far.
VW recently expressed caution about the further course. For the time being, the goal is to keep 7 to 8.50 euros in the till for every 100 euros in sales this year. Analysts believe that revenues can increase again by up to 6 percent to 266 billion euros.
Above all, however, energy security is hardly calculable. Should gas imports from Russia be stopped across the board in Western Europe, the remaining quantities would probably first be distributed to private households and public institutions – not to industry.
“If we were really cut off from deliveries, that would be a difficult situation for Germany,” warned Diess. “We don’t want to imagine that.” A sudden lack of Russian natural gas could also delay VW’s conversion of its own electricity and heating plants from coal to gas.
At its headquarters, the company also supplies the city of Wolfsburg. “The threat that we no longer have a gas supply is also a serious threat for Wolfsburg,” said Diess. “We are now feverishly working on operating our coal-fired power plants for even longer and making sure that the gas allocation – if it comes – would be taken into account in such a way that we can continue to supply the city.”
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