Daily Management Review

Tesla-Rival Volkswagen Boosts Outlook For Margin Again Following Record Profits


Tesla-Rival Volkswagen Boosts Outlook For Margin Again Following Record Profits
Reporting record earnings in the first half of 2021 that surpassed even pre-pandemic levels, German auto major and Europe's largest carmaker Volkswagen increased its profit margin target for the second time in less than three months.
A slew of targets and deals for the current year that are designed to overtake Tesla as the world's top electric vehicle (EV) player were unveiled by the company on Thursday as envisioned by the company’s Chief Executive Herbert Diess.
The targets include bidding for Europcar on Wednesday in a deal that valued the car rental company at 2.9 billion euros ($3.4 billion) as the company strives to make it big in the area of mobility services which the company believes will become a major source of profits in the near future.
"Yes, we did buy a car rental company, but it won't be a car rental company probably in 5 to 10 years' time. It can be a big mobility platform," Diess told journalists. "Our electric offensive is picking up momentum and we will keep on increasing its pace in the months to come," he said.
For the entire year, the German car maker now expects its operating retu8rn on sales to be between 6.0 and 7.5 per cent compared to its previous guidance of between 5.5 and 7 per cent. The company also slightly raised its forecast for net cash flow for its automotive division and now expects it to be more than in 2020.
The company reported first-half operating profit before special items at 11.4 billion euros – higher than the previous record of 10 billion euros that the company had reported in 2019 prior to the coronavirus pandemic which brought down the global economy.
Strong demand for high-margin luxury Porsches and Audis drive the strong performance of Volkswagen for the first half of the year.
Porsche SE, Volkswagen's largest shareholder with a 31.4% stake, also raised its financial outlook following the carmaker's results, forecasting profit after tax of 3.4-4.9 billion euros in 2021.
A shortage of crucial semiconductors has hit the global car sector with a number of rivals of Volkswagen – including Daimler, BMW and GM, forced to adjust or halt production. In order to adjust to cuts in production, Volkswagen trimmed its forecast for deliveries to customers.
"The risk of bottlenecks and disruption in the supply of semiconductor components has intensified throughout the industry," it said.
The German company now forecasts its deliveries to be up "noticeably" in 2021 from the 9.3 million last year while it had previously forecast a significant rise in deliveries for the current year. The new outlook roughly corresponded to a 10 per cent increase, said Volkswagen Chief Financial Officer Arno Antlitz.