Volkswagen posts €10bn profit for 2020 after late recovery

Aggressive cost-cutting campaign has begun to bear fruit, says car giant

Volkswagen sold 15 per cent fewer cars last year than in 2019.

Volkswagen sold 15 per cent fewer cars last year than in 2019.

 

Volkswagen defied the pandemic to post operating profits of €10 billion last year after the German group benefited from a late surge in global demand for cars.

The world’s largest carmaker, which looked set to record big losses in the early months of the Covid-19 crisis, hailed “quite robust” sales in the second half of 2020 in a short release ahead of fuller results in February.

VW – which includes the Audi, Porsche and Seat brands – said the final three months of last year were even stronger than the previous quarter, in which it made €3.6 billion in pre-tax profits. Final figures are not yet available for the fourth quarter.

The company said an aggressive cost-cutting campaign, which led to a clash with union bosses during the summer that almost cost chief executive Herbert Diess his job, had begun to bear fruit.

As a result, the Wolfsburg-based company said operating profits for the year – before one-off charges related to the diesel emissions scandal – were more than half that of the €19.3 billion it made in 2019, while net cash flow stood at about €6 billion.

China results

Earnings from the group’s operations in China – its largest and most profitable market – will largely be reported separately as they are run as joint ventures, VW confirmed.

Shares rose 4 per cent to €169.10 by late afternoon trading in Frankfurt.

VW is the first big automaker to release figures for the pandemic-ridden year, in which overall sales are expected to dip by more than 15 per cent worldwide, according to IHS Markit.

The VW marque managed to break even in 2020, the company said, despite delayed launches of its Golf 8 model and its flagship electric car, the ID 3, while the group’s premium brands enjoyed an extraordinary rebound, particularly in China.

Audi recorded its best-ever quarter in the last three months of 2020, selling more than half a million cars in the period for the first time.

Porsche sales dropped just 3 per cent over the course of the year and deliveries in China were up by more than 2,000 units on 2019, despite widespread lockdowns and dealership closures.

Overall, the VW Group sold 15 per cent fewer cars last year than in 2019.

The preliminary figures followed the group’s announcement on Thursday that it would have to pay more than €100 million to Brussels after failing to sell enough battery-powered and hybrid cars to meet the European Unions’s CO2-emissions targets.

While the financial hit has already been booked in previous quarters, the penalty marks a setback for the group, which is betting tens of billions of euros on a bid to overtake Tesla as the electric-vehicle superpower.

Mr Diess said the pandemic had hampered the rollout of emissions-free vehicles but emphasised the carmaker would meet its goals in 2021. – The Financial Times