Turning the corner of the crown, Volkswagen’s profits drop less than feared

BERLIN / LONDON / FRANKFURT (Reuters) – Volkswagen reported on Friday that its 2020 profits nearly halved due to the impact of the pandemic, but a rebound in China’s premium car sales and stronger fourth-quarter deliveries helped keep the largest car maker in the world in black.

The group reported full year operating income, excluding costs related to its diesel emissions scandal was € 10 billion ($ 12.2 billion), up from 19.3 billion in 2019.

Analysts had expected full-year 2020 operating profit of 4.8 billion euros, according to data from Refinitiv Eikon.

Net cash flow in its automotive division was around € 6 billion, and car deliveries increased towards the end of the year, the German group said in a statement.

“Volkswagen Group customer deliveries continued to recover strongly in the fourth quarter and even surpassed deliveries in the third quarter of 2020,” he said.

Full-year performance closes a turbulent 2020 for Volkswagen and the automotive industry. A pandemic-fueled sales slump led to a loss in the second quarter before Volkswagen returned to profitability in the third quarter in the wake of growing demand for luxury vehicles in China, the world’s largest auto market.

Shares in Volkswagen reached their all-time high in 11 months after Friday’s earnings release. They rose 2.7% to € 166.4 in the early afternoon of trading.

Major shareholder Porsche Automobil Holding SE, which owns 31.4% of Volkswagen and 53.1% of the group’s voting rights, said it is likely to post a significantly positive profit after tax for 2020 as a result.

“The breadth of pace is welcome and supports upcoming full-year results across the industry,” Jefferies analysts wrote.

Volkswagen sales rose 1.7% in December, at a time when new car registrations in Europe fell by nearly 4%, data from demonstrated the European Association of Automobile Manufacturers.

Volkswagen and its rivals still face challenges from the coronavirus pandemic, including a global shortage of chips needed for production and ongoing shutdowns in various markets to fight the epidemic, meaning 2021 will be another tough year. .

The automaker also faces stiff competition in developing electrified and self-driving cars. The merger of Fiat Chrysler and Peugeot-owning PSA to create the world’s fourth largest carmaker, Stellantis, increases the pressure.

Volkswagen said Thursday it missed EU carbon dioxide (CO2) emissions targets from its passenger car fleet last year and faces a fine of over 100 million euros.

The group is expected to release detailed data for 2020 on March 16.

($ 1 = 0.8215 euros)

Reporting by Kirsti Knolle, Nick Carey and Christoph Steitz; Editing by Maria Sheahan, Mark Potter and Susan Fenton