VW Group’s Operating Margin Takes Hit From WLTP Testing & EV Push

MAR 12 2019 BY STEVEN LOVEDAY 30

New emissions testing, continued investments in EVs, dropping North American sales, and Chinese joint ventures are costly.

At its annual press conference, Volkswagen Group reported that its brand margin dropped to 3.8 percent in 2018, from 4.2 percent in 2017. Targets were set at 4 to 5 percent, so the group missed its mark.

More specifically, profits for Audi dropped due to a diesel-related charge in Europe, as well as delays with the new WLTP testing cycle. Additionally, Bentley suffered from a significant operating loss. In 2017, it recorded a 55 million euro profit. However, for 2018, losses were at some 288 million.

Overall, the new WLTP testing cycle caused the various brand’s production delays. VW reported that its brands couldn’t ready cars fast enough for the test. Group CEO Herbert Diess noted that the testing cycle will keep causing issues, but as the year moves on, problems should be reduced. He shared:

Audi was hit particularly hard. It will probably be the end of the first quarter before all variants are available again.

In addition to the concerns with the new emissions testing, VW Group’s North American sales declined by 2 percent. Moreover, VW’s share of its profits from joint ventures in China have dropped 2.5 percent.

With all of this being said, Volkswagen Group has continued to promote its full-fledged push and massive investments into upcoming EVs across most of its brands. The company has plans to manufacture some 22 million EVs by 2028. In the meantime, VW says its goal is to push its operating margin up to 6 percent by 2022. This will involve laying off workers, but Diess points out that less manpower is needed to build electric cars. He concluded:

The reality is that building an electric car involves some 30 percent less effort than one powered by an internal combustion engine.

Source: Automotive News

Categories: Audi, Volkswagen

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30 Comments on "VW Group’s Operating Margin Takes Hit From WLTP Testing & EV Push"

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VW struggling to meet the lame WLTP standards, and then blaming those standards for their problems. Surprising, considering they implemented cheating software into millions of diesel vehicles for years, with no struggle at all.

wow, you seem really well informed. thanks for contributing with your opinion pal.

Sure thing, buddy. I’m not all the well informed, this is all well known information. I just happen to retain what I read.
Thanks.

There was plenty of struggle, they had to keep vehicles priced affordably and desirable and those standards left little choice and naturally lead to the VW software fixes since they were too difficult to meet. Granted, VW did the wrong thing, but there is a reason companies push back on those. The regulators need to be better at ensuring compliance as well. Really, for as clean as they want to be you have to transition to different technology, which they are doing (now), but you do need to allow some timeline for that.

Puuuurrrrfect.
Now you redirect blame from VW to regulators. US brands had no trouble managing standards. Asian brands managed standards. VW choose to not redesign their own vehicles. VW choose that asking a driver to fill up adblue every 5k instead of every 10k would be a disaster to the convinience. VW choose to ignore standards untill a phase in development where other car components already took the space away from any solution emission control would require.

Double purrrfffect for complaining about regulators doing not enough to enforce, under a news about car oem not being able to keep up with regulatory tests.
What will come next? You want us to pay VW execs for the damages caused by stress by all those investigations?

I am not saying it is entirely fault of the regulators, only that the regulations lead to this type of behavior. Fault is still with VW. US “War on Drugs” has in fact created a very strong black market for drugs, but people selling/buying are obviously not legal.

VW had by far the most popular diesels in the US, in a large part because they weren’t using Urea and were far more efficient. They had the far more desirable product due to their cheating.

I think better designed laws and better testing from regulators could have avoided this. Given push to meet deadlines, I can understand how this happens (it isn’t right).

Regulations lead to cheating? We should just get rid of all laws then, huh? I mean, I wouldn’t want to suddenly become a murderer, so we should get rid of murder laws, so I don’t become one.

Did you even read what I wrote?

I said the incompetence of the regulators and pressure to meet difficult to meet regulations without impacting sales creates an environment where this happens. Take note that it wasn’t only VW doing this. VW was guilty and got what they deserved (I never said otherwise).

No one forced VaporWare to sell DIESEL engines! They could have followed ideas of Toyota making hybrids. But no: Made in Germany decided to cheat, and continued to cheat long after they got caught! No excuses here buddy! Then they made fun of Tesla: “Everybody can make a car with a battery as it is so simple”! “By 2018 we will sell millions of them.” And look what they csme up with: a completely useless étron that doesn’t run a mile. VaporWare, that’s what they were, and that’s what they are. And so far there is no change to be seen at the horizon, other then more empty announcements!

No struggle at all. There were several distinct cheating issues, but the main one, was the software for the smaller TDI engines on the smaller models that constituted a “defeat device” in formal EPA terms.
Once VW found it couldn’t meet the emissions targets without adding an AdBlue reservoir (*), it could have been handled easily: Simply give up on the aggressive marketing targets for fuel economy & performance, and have the cars use the same ECU algorithms it used when it determined it was under test conditions 100% of the time, IRL. That’s what other carmakers had to do.

(*)Depending on journalistic source, there was no time to redesign the cars to make space for the reservoir & redo development & testing with it, or it would have been expensive.

The only reason they cheated was to increase 0-60 times. There was no problem with meeting the standards by reducing performance or changing their emissions equipment. They CHOSE not to so that they could sell more cars. They didn’t do this as some last ditch desperate move to keep market share because of the evil regulations, they intentionally did this in order to INCREASE their market share by cheating as part of a well publicized effort to become the largest car seller in the world.

Don’t give cheaters excuses. They don’t deserve them.

I think you are mixing some things here. WLTP is not a standard to meet, it is a standard for measuring. VW Group (particularly Audi) underestimated the amount of effort it takes to test all it’s dozens of different models with 100s of different configurations. Since they could not present the data in a market conform way, they could not sell. End of story.

Amazing how people just post anything these days, eh?

The issue with WLTP is also that when using the new less incorrect measuring method, a lot of VW cars no longer lived up to the fuel efficiency requirements – that is why f.x. Porche only could sell the hybrid version of the Panamera for almost a year.

VW had the best year ever in 2018. Only 2 markets were smaller (US = diesel, and China/Asia = retooling for EV production), while Brazil increased with 28,6% for example.
The electric Golf had a 45% sales increase. Kind of heavy on the bad VW news here. . but whatever readers prefer I guess.
The VW group used parts of 2018 for retooling several factories, prepareing some for EV production (In Europe and China) and PHEV changes to comply to WLTP and so on.
Being huge and all, ensured they raked in billions in profit as usual.

Did you glean the “struggling to meet WTLP standards from that article?

OK, some numbers are mixed up and others taken out of context, which makes it sound like VW Group is close to failing. VW Group sales are up to 10.8m vehicles (+0.9%, biggest manufacturer WW), EUR 236bn (+2.7%). Operating margin is slightly down to 5.9% (6.0% last year). EBIT margin at 6.6% (6.0% last year) and profits after tax are up EUR 12bn (+6%). By the way Operating Margins are not affected by R&D cost for EVs at all, which makes the headline just nonsense, or at least expresses the lack of financial understanding of the author.

Maybe we’re on Seeking Alpha by mistake?

(Original James) VW said it’s groups could’nt doctor….I mean, “ready” their cars fast enough for the tests… 😀

Actually 2% decline in margin seems tiny in respect to Dieselgate and the PR hit they took in regards to the scandal.

EV racing ( ID R record runs a Pikes Peak and Goodwood ) bears good to help restore VW’s reputation. EV establishment by their brands will go a long way in restoring the consumer trust they have lost.

After dieselgate, their sales increased. Electrify America is the only thing remaining from that and it turns out to be a blessing for them instead of a punishment.

Hope VW Group goes bankrupt. Criminal and ugly. Just for idiots

Considering how well their car-plattforms perform financially, they will never go out of business.

The new plattform for EVs looks very very good!

So your emotions make you want a major company that is working on transitioning to EVs to go under and let ICEV’s take those sales? Guess you don’t care about the environment.

We want companies to transition of EV’s, not make powerpoint slides about “electrified” vehicles in a decade.

Looks like you only took the negative parts out of the press release…. So here’s the good stuff you left out: “The Volkswagen Passenger Cars brand continued its product initiative in 2018, growing its sales revenue by 6.8 percent to EUR 84.6 billion.” “At EUR 17.3 billion, the ŠKODA brand’s sales revenue in 2018 was 4.4 percent higher than in 2017.” “The SEAT brand continued its upward trend performance in fiscal year 2018: sales revenue was EUR 10.2 billion, exceeding the previous year’s record figure by 3.1 percent. ” “The 2018 fiscal year was once again very successful for Porsche: the sales revenue generated by Porsche Automotive rose by 9.2 percent to EUR 23.7 billion. Operating profit increased by 2.7 percent year-on-year to EUR 4.1 billion. ” “The Scania brand increased its sales revenue to EUR 13.4 (12.8) billion in fiscal year 2018. Operating profit improved by 4.4 percent to EUR 1.3 billion, particularly as a result of the higher volume, positive mix effects, favorable exchange rates, and a better financial services business. ” “Driven by higher volumes, sales revenue at MAN Commercial Vehicles in fiscal year 2018 climbed to EUR 12.1 billion, exceeding the prior-year figure by 9.2 percent.… Read more »

I’m guessing a fan VW site directed all the loud muffler and rear spoiler and flame decal types over here. It’s feeling awfully “pro gassing of monkeys” in here today.

How is VW getting 22 Mil cars with 40 to 100kw in each automobile for volume of batteries needed?

Would it surprise you if in the end they would not? We don’t exactly live in the world of truth …. Press releases and tweets rule …

Just don’t read it, if the author doesn’t fit your narrative or what you believe in … Really easy. No need to speculate about hate this or that, as you just did.