VW raises full-year outlook, warns on growing chip shortage

Europe

Volkswagen Group raised its earnings outlook following robust first-quarter earnings, helped by a swift market recovery in China and higher demand for battery-powered vehicles.

Operating return on sales is forecast to come in between 5.5 percent and 7 percent this year, compared with a previous range of 5 percent to 6.5 percent, VW said in a statement on Thursday.

VW also raised its projection for net cash flow and net liquidity, while cautioning that the semiconductor shortage hitting the industry will have a “more significant impact” in the second quarter.

“We started the year with great momentum and are on a strong operational course,” CEO Herbert Diess said in the release.

First-quarter operating profit surged to 4.8 billion euros ($5.8 billion) from 900 million euros last year, when the COVID-19 pandemic shuttered showrooms and factory floors. The operating return on sales jumped to 7.7 percent.

Total deliveries during the first quarter jumped 21 percent to 2.43 million vehicles, mainly driven by China. Deliveries of electrified models more than doubled to 133,300 vehicles, of which 59,900 were battery-electric vehicles and the remainder plug-in hybrids.

VW Group’s better outlook is also driven by improved demand for high-margin premium cars from its Porsche and Audi brands, a trend that has also been observed by rivals General Motors, Daimler,  Ford and Stellantis. During the quarter deliveries of Porsche and Audi cars were both up about a third year-on-year.

VW is at a pivotal moment in getting its electric-car push off the ground and narrow the gap to Tesla.

Among the new models this year are the VW ID4 and the Audi Q4 e-tron, two crossovers about the size of Tesla’s Model Y.

VW has targeted selling about 600,000 purely battery-powered cars this year and expects to comply with tightening European emission rules.

Reuters contributed to this report

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