Operating profit of Volkswagen brand drops by almost a half in the first quarter

Article by Anita Panait, on April 30, 2013

The Volkswagen brand saw its operating profit for the first quarter of 2013 reduced by almost half to EUR590 million as the carmaker struggles to sell more in a recession-hit Europe by offering steeper discounts. The VW brand accounts for over half of the VW Group’s EUR46.6 billion ($60.7 billion) sales.

The VW brand also saw its profit margin drop to 2.4 percent from 4.1 percent in the first quarter of 2012. VW chief executive Martin Winterkorn remarked that the current environment is definitely a tough challenge for the entire industry. Winterkorn remarked that the VW group is not “completely immune” to the intense competition and the impact this is having on the carmaker.

Sales of VW brand vehicles, including the best-selling Golf hatchback, dropped in March for the first time in over three years. Despite the setback, VW reiterated its targets announced on March 14, 2013 to match the EUR11.5 billion record operating profit set in 2012 and to drive sales and deliveries to new record levels.

VW is hoping to boost its sales growth by launching around 60 new models this year, including facelifts and overhauls as well as the new Golf. A VW dealer told Reuters said the carmaker has been driving sales of models like the Golf or the Tiguan compact SUV since February by offering retail sales incentives of up to EUR1,800 per vehicle under a special discount program that runs until June 30. The dealer added that depending on the carmaker’s budget, the program could be extended by another three months.

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Topics: volkswagen, profit

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