Volkswagen sticks to earnings outlook despite investment challenges

By Christoph Rauwald

Volkswagen expects to lift profit margins over the next few years despite an expensive shift to electric cars and growing economic headwinds in Germany and abroad.

VW, in the midst of the car industry’s most ambitious electric-car push, is sticking with a target of selling a million battery vehicles by 2025, Ralf Brandstaetter, the unit’s chief operating officer, told reporters.

The brand is sticking with a goal of 6% operating-profit margins in 2022, up from 5.2% in the first six months this year. The sales goal “is the guiding star of our strategy”, Mr Brandstaetter said.

Luring buyers toward e-cars — from tech-savvy youngsters to traditional loyalists — will be critical for the VW group to turn its €30bn spending spree into a success and avoid steep EU fines for breaching emission limits.

Trade woes and recession fears are adding to the urgency and forcing VW to become more efficient after a decade of rising demand. Economic swings are hard to predict and do pose a risk in coming months, Mr Brandstaetter said, from Brexit’s fallout to persistent tension between the US and China.

We’re monitoring the situation very closely.

However, VW’s broad global presence and economies of scale put the manufacturer in a better position than many rivals to cope with economic swings, he said.

While the manufacturer’s diesel-emission scandal caused a fundamental crisis, it also “became a catalyst for the transformation of Volkswagen,” Mr Brandstaetter said. That set the stage for the bold plans underway now. VW plans to use its vast scale to produce electric cars at more competitive costs than rivals.

The brand, which accounts for about half of the overall group’s global deliveries, in the past, has been bogged down by an unwieldy range of vehicle variants, bloated costs, and poor budget discipline.

A new brand logo, which will be unveiled next month, can be displayed on car fronts as well as smartphone screens. It was last tweaked six years ago with a more three-dimensional look and has changed only modestly since the manufacturer’s resurrection after the Second World War.

VW’s electric-car offensive starts with the introduction of the ID later this year, and will be followed by almost 70 more models across the group in the next 10 years.

Bloomberg