As expected, the global automotive industry is in bad shape.
Almost every automaker around the world has reported a decrease in sales and production in Q1 of this year, and not even the bullish Volkswgen brand is spared.
The German auto manufacturer reported that sales and operating profits have plunged in the first quarter of the year. According to the automaker, this is mainly due to the coronavirus outbreak which forced dealerships to close and the production of parts and vehicles suspended.
“The global COVID-19 pandemic substantially impacted our business in the first quarter. We’ve taken numerous countermeasures to cut costs and ensure liquidity and we continue to be robustly positioned financially. The gradual restart, also of our factories outside of China, has begun. The health of our employees and suppliers remains the clear priority here,” said Frank Witter, a member of the Group Board of Management responsible for Finance and IT.
Based on the report, Volkswagen’s operating profit in the first quarter fell by 81.4% to 900 million Euros as compared to the EUR 4.8 billion in the same period last year. Meanwhile, Q1 earnings before tax dropped to EUR 700 million in comparison to last year’s EUR 4.1 billion. Operating return on sales was reported at 1.6%. As of March 2020, net liquidity stands at EUR 17.8 billion.
Though the Q1 figures are down due to the pandemic, it is expected to be the same case for Q2. Despite that, Volkswagen expects operating profits for 2020 to still remain positive. However, it will severely be below that of the prior year.
Volkswagen has begun restarting production as European governments are slowly easing on lockdown measures, and it won’t be long before dealerships re-open.