Volkswagen results buck industry trend, but slowdown to hurt sales

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
VW says global economic slowdown is expected to hurt its sales growth. Photo: Michele Tantussi/Reuters

Germany’s Volkswagen Group (VOW.DE) released solid earnings for the third quarter of 2019 on Wednesday, thanks to the success of higher-margin SUVs, as well as a surge in Skoda and Porsche sales.

However, it said it expects flatlining sales growth for the rest of the year, as the global economic slowdown hurts demand. "The vehicle markets in many regions of the world will decline faster than previously expected," VW said.

Compared with other big carmakers, including Germany’s Daimler, which has twice issued profit warnings in 2019, VW’s results are upbeat, but the company remains cautious: “We know what needs to be done: get our act together on vehicle launches and be very cautious on costs and expenses,” chief finance officer Frank Witter told Bloomberg TV.

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In the nine months ending September, VW reported year-on-year sales revenue growth of almost 7%, to €186.6bn (£161bn), and adjusted operating profit of €14.8bn, up from €13.3bn, the world’s biggest carmaker said on Wednesday.

Special items, mainly from legal costs connected to the ongoing fallout from the 2015 diesel scandal, came to €1.3bn. In September, a German state prosecutor brought criminal charges of market manipulation against current VW chairman Hans Dieter Poetsch, chief executive Herbert Diess, and former CEO Martin Winterkorn, accusing them of not notifying shareholders early enough that the diesel scandal was about to break.

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Volkswagen, which will start producing its all-electric ID.3 model next month, is investing over €30bn in its shift to electric vehicles until 2023, and planning to launch some 70 electric models in the next 10 years.

It is also investing heavily in batteries, launching the first phase of its new battery-cell development centre in Salzgitter, Germany in September. It said the first phase will cost more than €100m, and encompass the developing, testing and manufacturing of lithium-ion batteries.