VW profits crash nearly 20%

Volkswagen has reported a 19% drop in profits for the first quarter of 2016, as the company struggles to emerge from beneath the cloud created by last autumn’s emissions scandal.

Profits for the first three months of the year totalled £2.4bn before tax, down from nearly £3.1bn in 2015. Revenues were also down for the same period, falling 3.4% to £39.3m. The news comes after VW recorded its first annual loss in more than 20 years in 2015, having set aside £12.5bn to pay for costs related to the scandal – more than double the original amount.

One fall out for the scandal, which affected 11 million diesel vehicles, is that VW will buy back nearly 500,000 cars in the US as well as compensating their owners. A similar arrangement will not be introduced in Europe though, where diesel emissions requirements are less stringent meaning less work needs to be done to the cars.

Matthias Müller, VW’s chief executive, said, ‘In light of the wide range of challenges we are currently facing, we are satisfied overall with the start we have made to what will undoubtedly be a demanding fiscal year 2016. In the first quarter, we once again managed to limit the economic effects of the diesel issue and achieve respectable results under difficult conditions.’

VW-branded cars suffered the most, with operating profits crashing from £396m to £56m. Audi was only marginally down while Porsche, Skoda and Seat all returned higher sales and profits.

Matthias Müller added, ‘2016 will be a transitional year for Volkswagen that will see us fundamentally realign the group.’

Frost & Sullivan’s, Shwetha Surender, programme manager, mobility commented, ‘On a global level, Volkswagen has significant exposure to emerging markets which will spur recovery. China for instance, accounts for 40% of VW Group unit sales. Their position in China is very important as it is the largest auto market, and VW is one of the market leaders with a share of around 15%. Though this has been volatile lately, they have managed to gain back the ground they lost in late 2015.

‘At a global level, with sales up by 0.8% the outlook for 2016 is fairly positive.’