Volkswagen warns that war in Ukraine has started to hit supply chains and costs

The German car manufacturer says war in Ukraine is already impacting its supply chains and material costs.

Volkswagen has warned that it has started to feel the impact of the war in Ukraine on supply chains and raw material costs.

Volkswagen has warned that it had started to feel the impact of the war in Ukraine on supply chains and raw materials prices in the first quarter, with the longer-term effects on its business difficult to predict.

The company indicated an €8.5bn operating profit for the first three months of the year, but noted that €3.5bn of that was attributable to commodity hedges amid soaring raw material prices. Volkswagen shares rose around 1%.

Its operating return on sales jumped to 13.5% in the first quarter, according to the preliminary figures, from 7.7% in the same period of 2021 when the Covid-19 pandemic and semiconductor shortages were weighing heavily on results.

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A spokesperson said in March that the company had long-term measures in place with suppliers to secure raw materials, including an "extensive and forward-looking purchasing and hedging program for important precious metals".

Nonetheless, Volkswagen warned at its annual results conference last month that the outbreak of war in Ukraine called its annual forecast of an 8% to 13% boost to revenue with a 5% to 10% increase in deliveries into question.Volkswagen Group deliveries were down almost 22%. 

Meanwhile, Germany’s economy ministry wants to end subsidies for plug-in hybrid cars earlier than planned at the end of this year and cut a cash bonus for electric vehicles by a third from 2023, according to a person familiar with the plans. 

• Reuters and Bloomberg