Storms are pummelling automakers — but VW is doing pretty well.

Given that we specialise in servicing, repairing and MOTing VW Group cars, we like to keep an eye on how our favourite manufacturer is doing financially. Here’s our quick, non-technical update.

He’s not made a very good job of colouring those bars in.

All auto manufacturers, and especially European ones, have faced some real challenges over the last couple of years. Hot on the heels of a global pandemic came chronic supply shortages, then the disruption of Russia’s war on Ukraine. How has the VW Group been weathering this series of storms? As it turns out, not badly at all.

In 2021, the Group’s vehicle sales were hit by the double whammy of pandemic aftershocks and semiconductor shortages. Numbers were down by a hefty 6.3% compared to 2020, and they shifted a whopping 2.3 million fewer vehicles than in 2019. This may sound pretty dire… and yet the Group’s profits actually increased. In fact, in 2021, VW Group actually doubled their operating profit compared to 2019, clearing €20 billion.

How did they manage that? According to their chief financial officer, VW got better at dealing with crises and were also able to reduce their operating costs. Then there’s the impact of their electric line-up. As we’ve discussed many times before, VW Group took a big gamble on investing in electrons, and as demand for EVs went through the roof, that’s starting to be rewarded. Of course, that’s still only a fraction of their overall sales (we make it about 5.3% in 2021), but it’s a growing and profitable one.

So despite everything, VW had a pretty good 2021.

Then, in the first quarter of 2022, they did it again. The invasion of Ukraine, and more Covid-19 meausres in China, saw vehicle sales slump compared to the first quarter of 2021 (1 million vs 1.36 million). But through even more efficiency savings, (plus optimising their models and pricing), profit was up again, this time by just under 5%, compared to the previous year. Sales of BEVs (battery electric vehicles) were up a substantial 74% in that time, though only about one in twenty of their total sales was fully electric.

Hedging instruments have hit VW’s profits, whatever that means.
Image: Mark Hunter, CC BY 2.0, via Wikimedia Commons

In the second quarter of 2022, profits have taken a hit. According to their chief financial officer, this is because:

Positive fair value measurements on hedging instruments outside hedge accounting burdened our result in Q2.

Got that? Good, because we haven’t got a scooby what it means. At any rate, the end result is that their operating profits were down by 28% compared to the second quarter of last year.

However, given that they had that stonkingly good first quarter, VW Group is still doing well over the first half of the year.

Any guesses which marques were highly profitable? It’s the luxury brands Lamborghini (31.9% margin), Bentley (23.3% margin) and Ducati (12.6% margin). As fuel and inflation spirals ever-upwards, apparently there’s still a healthy market for cars that cost as much as a house. Go figure.

There are plenty of challenges ahead for VW, most notably looming European gas shortages over the winter. But from what we’ve seen VW seems to be as well-braced as they could be. Watch this space!

The WVS blog covers a wide range of automotive topics, from the contentious to the light-hearted. We are an independent garage specialising in all the VW group marques, including Audi, Volkswagen, Skoda and SEAT. WVS provides services, repairs and MOTs, delivering a main dealer level of care at affordable prices. To book your vehicle in, or for any enquiries, get in touch