Volkswagen posts lower first-quarter profit on weak China sales

First-quarter sales revenue rose 22% to 76 billion euros, Volkswagen said, driven primarily by a recovery in sales volumes in Europe and North America.

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German giant Volkswagen reported a drop in first-quarter profit on Thursday, as weak sales in China reaffirmed the automaker’s need to close the gap on its rivals in the country’s fast-growing electric vehicle market.

Operating profit fell 31% to 5.7 billion euros ($6.3 billion) in the first three months of 2023, down from 8.3 billion euros in the same period last year.

Europe’s biggest carmaker said operating profit before valuation effects from commodity hedging rose 35% to 7.1 billion euros.

First-quarter sales revenue rose 22% to 76 billion euros, Volkswagen said, driven primarily by a recovery in sales volumes in Europe and North America.

“We’ve had a really encouraging start to 2023, with both revenue and underlying operating profit significantly improved,” Volkswagen Chief Financial Officer Arno Antlitz told CNBC’s Annette Weisbach on Thursday.

“When we published our targets for 2023, they were very ambitious and we got this feedback, but based on that solid first quarter and the order backlog of 1.8 million cars in Europe, we are confident that we will achieve all financial targets for 2023. “

Volkswagen shares were slightly higher on Thursday morning. The stock price is up about 5.5% year-to-date.

Volkswagen said deliveries in China fell 14.5% in the first three months of 2023, but it is confident sales will rebound for the rest of the year, citing an expanded model range and China-based technology.

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Asked about the decline in first-quarter sales in China, Volkswagen’s Antlitz replied, “We had a slow start in China.”

He also said it was important to distinguish between China’s internal combustion engine market, where Volkswagen has long been a leader, and the country’s battery electric vehicle (BEV) market, where rivals including Chinese EV giant BYD are looking to catch up.

“I came back from Shanghai and I spent three days there looking at the competitor cars and talking to the teams in the field and it’s clear that we need to accelerate, especially on the BEV side,” Antlitz said.

“I believe we will play an important role in China in the future as well,” he added.

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