VW profit soars, but storm ahead

VW. File picture
VW. File picture
Image: Reuters/Stephen Lam/File Photo

Volkswagen reported a leap in second-quarter profit on Wednesday thanks to strong sales, but the German car giant warned that strict new emissions tests and global trade tensions posed great challenges in the months ahead.

The Wolfsburg-based group said net profit jumped 6.8% year on year to ß3.3bn (R51bn) between April and June, beating analysts’ expectations.

The positive result comes even after VW had to shell out a further ß1.6bn (R25bn) in connection with the diesel crisis, as the fallout from its 2015 emissions cheating scandal rumbles on.

Revenues were up 3.4% to ß61bn (R941bn) after the VW group – whose 12 brands include the luxury Porsche and Audi as well as the more affordable Skoda – delivered a record 2.8 million vehicles in the second quarter.

Despite the good news, new VW CEO Herbert Diess sounded a note of caution.

“We cannot rest on our laurels because great challenges lie ahead of us in the coming quarters – especially regarding the transition to the new WLTP test procedure,” Diess said.

“Growing protectionism also poses major challenges for the globally integrated automotive industry.”

Volkswagen is set to close its iconic Wolfsburg plant for several days in the third quarter as the group scrambles to adapt to tough new EU emissions tests from September 1, known as WLTP.

The tests are meant to better mimic real-world driving conditions rather than lab tests, to prevent the kind of rigging exposed in VW’s “dieselgate” controversy.

Like other German carmakers, Volkswagen is also nervously eyeing US-EU trade tensions, particularly President Donald Trump’s threat to slap duties of up to 25% on car imports.

Despite the clouds on the horizon, the VW group confirmed its full-year outlook, expecting revenues “up to 5% higher” compared with the previous year.

It is targeting an operating profit margin before special items of between 6.5% and 7.5%.