Strong Demand For Premium Cars Prompts Volkswagen To Lift Margin Target For 2021

There was strong demand for its car models that delivers higher margins during the first three months of the year said the German car maker and the largest car maker of Europe, Volkswagen, which prompted the company to raise its operating margin target for the current year.

An operating profit margin of between 5.5 and 7 per cent for the current year is now expected by the German group compared to its previous forecast of the number lying between 5.0 and 6.5 per cent while also forecasting a one fifth growth in vehicle deliveries and sales.

During the first quarter, there was a rise i n demand for the group’s high-margin premium cars such as Porsche and Audi which helped the company to announce the better outlook for the year. This trend of strong demand for high profit margin vehicles have also been noted by other car makers including General Motors, Daimler and Ford and Stellantis.

There was about a one third year on year increase in the deliveries of the cars under the Porsche and Audi brands of Volkswagen during the first quarter, the company has said. It also reported more than doubling of the sale of electric vehicles to 133,300 units.

“We started the year with great momentum and are on a strong operational course. This is clearly reflected in our positive quarterly figures,” Volkswagen AG CEO Herbert Diess said. “Our successful e-offensive continues to gain momentum and we have significantly expanded it with attractive new models.”

There was a jump of 1.2 per cent in the stocks of the company following the results.

The details provided by Volkswagen about its electric vehicle strategy, including the increase sale targets and its plans of building six battery factories in Europe apparently pleased the investors of the second largest carmaker of the world by vehicle sales this year.

In the first quarter to March cost cuts and higher sales helped the German auto making group to report operating profit at 4.8 billion euros ($5.8 billion) compared to the same number being at 0.9 billion in the same period a year ago when the business of the company was severely impacted by the Covid-19 pandemic.

The announcement of the company of its better performance expectations for the whole year came at a time when car makers all over the world are expecting a continued hit to production because of the global shortage of automotive chips which they expect to continue through the second quarter as well and the stiaution getting better only in eth second half of the year.

(Adapted from Investing.com)

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