Home Lifestyle Motoring Why Volkswagen’s profits are surging despite sagging sales

Why Volkswagen’s profits are surging despite sagging sales


Volkswagen’s profits jumped last year despite it selling fewer cars as buyers forked out for better-equipped cars.

File picture: Fabian Bimmer / Reuters.

WOLFSBURG – Volkswagen announced on Friday that its net profits jumped last year despite selling fewer cars due to the semiconductor shortage as buyers forked out for better-equipped cars.

The German carmaker’s net profit rose 75 percent to 15.4 billion euros (R230bn) in 2021.

The 12-brand group sold 8.6 million cars last year, 600,000 fewer than in 2020 and 2.4 million below 2019 levels. However, sales revenue rose 12 percent in part due to “favourable pricing” and reduced costs.

The world’s second-largest automotive group expects sales volumes to rise by 5 to 10 percent in 2022 despite the continuing impact of chip shortages, it said.

This prediction “is subject to the further development of the war in Ukraine and in particular the impact on the group’s supply chains and the global economy as a whole,” VW said in a statement.

Revenues are expected to rise between 8 and 13 percent in 2022, with operating return on sales to reach between 7 and 8.5 percent – compared with 7.7 percent in 2021 and 4.3 percent in 2020.

In 2021, “customers were prepared to buy better-equipped cars” and “premium brands fared slightly better” than less expensive “volume” brands, VW’s financial director Arno Antlitz told an online conference.

In addition, Volkswagen was able to give fewer discounts and concentrate its semiconductor sourcing on Europe at the expense of other less profitable regions, Antlitz said.

Earlier this month, Volkswagen’s CEO Herbert Diess warned that a prolonged war in Ukraine risks being “very much worse” for the European regions economy than the coronavirus pandemic, the Financial Times reported .

The interruption to global supply chains “could lead to huge price increases, scarcity of energy and inflation”, Diess told the newspaper. He also said Europe faces huge threat of higher inflation from prolonged conflict in Ukraine.

Carmakers, including Volkswagen, BMW and Porsche, are struggling to obtain crucial wire harnesses as suppliers in western Ukraine have been shuttered by the Russian invasion, forcing them to curtail production.

Earlier this month, Volkswagen halted its business in Russia, stopped vehicle exports to the country and suspended production at its Kaluga and Nizhny Novgorod sites.

AFP & Reuters

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