Volkswagen’s profit tumbled nearly 20% at the start of this year as car sales continued to fall in the wake of the diesel emissions scandal.
The German carmaker made a profit before tax of €3.2bn (£2.4bn) in the three months to March, down from nearly €4bn a year earlier. Revenues were down 3.4% to €51bn due to a decline in vehicle sales and negative exchange rate effects, the company said.
In April, VW recorded its first annual loss in more than 20 years for 2015, after more than doubling the amount set aside to pay for costs related to the scandal to €16.2bn.
The carmaker admitted last September it had installed software to cheat US emissions tests in 11m diesel vehicles. Under a deal struck with the US Department of Justice in December, the carmaker will buy back almost 500,000 cars and compensate owners. But the company has said a similar arrangement will not be introduced in Europe, where looser requirements on diesel emissions mean less work needs to be done on affected vehicles.
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 shares initially dropped as much as 3% in Frankfurt, and were later trading 1.5% lower at €135.90.
VW-branded cars have been worst-hit by the scandal. Operating profits plunged to €73m from €514m a year earlier. The Audi brand fared better, with sales and profits just slightly below last year’s levels , while Porsche, the Czech brand Škoda and the Spanish marque Seat delivered higher sales and operating profits.
The company stuck to its forecast of a fall of up to 5% in 2016 group revenues compared with last year, “depending on economic conditions – particularly in South America and Russia – and exchange rate developments as well as against the backdrop of the diesel issue”. It is expecting a “marked decrease” in passenger car sales revenues.
Müller said: “2016 will be a transitional year for Volkswagen that will see us fundamentally realign the group.”
Experts said the fact that Volkswagen was still making a profit showed that customers cared less about the emissions scandal than expected. When the scandal broke, the expectation was that the carmaker would struggle to survive.
Prof Christian Stadler at Warwick Business School said: “Under the circumstances a €3.2bn profit is not bad. Although rivals Toyota reported substantially higher profits of €4.5bn that was aided by a weak yen. But General Motors, the other company competing for the largest car company spot, had lower profits than Volkswagen.”
He said the emissions scandal was costly, but “far from life-threatening for Volkswagen”. He reckoned the company would manage the payments to settle numerous lawsuits around the world, and said the last few months had shown that potential Volkswagen customers “don’t care about the environmental issues that much. What they care about is quality and value for money”.
Ana Nicholls, automotive analyst at the Economist Intelligence Unit, said because Toyota and GM had also seen sales slip, “ironically … Volkswagen is now on track to become the world’s biggest vehicle-maker this year”.
Ketan Patel, fund manager at EdenTree Investment Management, which does not hold any shares in VW or any other carmakers, said investors were not impressed. He said the bill arising from the scandal could rise from €16bn to more than €30bn, and noted that Norways’s sovereign wealth fund was taking legal action against the company.
“While the group may be on its way to becoming the biggest vehicle manufacturer in the world, it is the shareholders who will be picking up the very large bill, which even if paid, will not guarantee the future integrity of the brand.”
