VW lowers sales outlook as China demand weakens

Volkswagen lowered its sales forecast as demand weakens in China, where the group’s largest division delivers more than 40% of its vehicles, outweighing gains in Europe.

The German group yesterday scaled back its expectations, predicting full-year sales to be flat on last year’s record 10.1 million cars, having previously forecast a “moderate” increase.

“The difficult market environment and fierce competition” is posing challenges, Finance chief Hans Dieter Poetsch said. The lowered sales forecast coincides with VW achieving its long-held ambition of becoming the world’s largest carmaker by sales after eclipsing Toyota.

But meeting the target three years early comes at a time when the twelve-brand group is looking for a new chairman and has shelved decisions on a new company structure until this autumn.

“Dependence on China reinforces the need to tackle underperformance in other markets,” said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne. “VW cannot afford to delay work on structural problems.”

But improving demand in the higher-margin western European market and cost cuts helped VW raise group operating profit to €3.49 billion which does not include earnings from Chinese joint ventures.