Volkswagen warned that it will take a huge effort to meet delivery targets this year, as the world’s largest automaker battles trade tensions and stricter emissions rules, while preparing to amp up digital investments.
Tougher pollution-testing procedures, aimed at preventing a repeat of Volkswagen’s cheating scandal, will take effect next month and cause delivery delays.
The German manufacturer is also bracing for higher tariffs around the globe, which could particularly hit Audi and Porsche, the group’s main profit earners. “Protectionist tendencies are escalating worldwide,” chief executive, Herbert Diess, said.
Meeting delivery goals, while avoiding deep discounts this year, will be a “titanic task,” said Mr Diess, who recently completed his first 100 days in office.
Beyond the daily issues, he’s readying VW for approaching challenges, from electrification to self-driving cars to sharing services. The company needs a “massive expansion” in software and in its digital investments, including new partnerships and acquisitions, he said.
Volkswagen shares fell slightly, after VW said it wouldn’t be able to repeat the 23% surge in profit it reported for the second quarter.
The challenges range from economic volatility, increasing competition, and the costs of the ongoing diesel scandal, to new, time-consuming exhaust-testing, Volkswagen said.
The shares are down 12% in the past year, valuing the car firm at just under €74bn.
It churned out more cars ahead of the EU emission-rules change. Production jumped 13.5% in the second quarter, twice the growth rate of deliveries. Volkswagen said, earlier this year, that the company may experience inventory build-up, ahead of next month’s introduction of the worldwide harmonised light-duty test procedure, or WLTP.
Mr Diess is grappling with political challenges, alongside an internal overhaul in the aftermath of the three-year-old diesel crisis, which continues to burden the industrial giant. In the second quarter, the company took €1.64bn in charges, mainly for a fine from German authorities, raising the total damages to about €27.4bn.
Rupert Stadler, the now-suspended head of the Audi luxury unit, was arrested in June by Munich prosecutors and remains in custody.
“We cannot rest on our laurels, because great challenges lie ahead of us in the coming quarters,” Mr Diess said. “Growing protectionism also poses major challenges for the globally integrated automotive industry.”