VW share prices hit the gas despite 12% profit fall

The German auto maker is struggling with lower European demand, but shareholders have remained loyal.

by Emma Haslett
Last Updated: 31 Jul 2013
Will European car manufacturing ever be restored to its former glory? Shares in German auto maker Volkswagen rose by an anaemic1% this morning, despite a 12% fall in first-half operating profits, which dropped to €5.78bn (£5bn).

But the company still beat analyst forecasts – which suggests either analysts have unusually low expectations of VW, or that the European market is still tough.

Revenues rose by 3.5% to €98.7bn, allowing it to maintain its forecast to full-year group revenues at €192.7bn.

The figures were released a day earlier than planned, although a spokesperson said there was ‘no special reason’ for doing so. The company blamed most of its decline in profits on a car recall in China and charges from MAN, the truck and engineering business it took control of less than a month ago.

Over here in the UK, it's easy to have a touch of Schadenfreude: over the past few years, our car manufacturing industry has stepped on the accelerator. Despite closures of various factories (most recently, the Ford plant at Dagenham), last year the industry broke all-time export records, with more than 1.2 million cars sold abroad, 8% up on the year abroad. Britain is the manufacturer of choice for everyone from Nissan to Toyota to Honda.

But in Germany – the home of the Mittelstand and companies with catchphrases like ‘Vorsprung durch Technik’ – things aren’t going quite as well. Figures published by the International Organisation of Motor Vehicle Manufacturers show the number of cars and commercial vehicles manufactured in the country fell by 8.1% in 2012.

What’s interesting is that despite its troubles, VW is still outperforming its European rivals (specifically the French), with ‘strong’ sales growth in China. Although the race is still on to be the European car manufacturer that conquers the Far East. Gentlemen: start your engines…

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