Volkswagen makes record profits, despite dieselgate losses

The Volkswagen Group “will be a role model in environmental protection, safety and integrity,” according to CEO Matthias Muller, who was speaking as the firm confirmed a record-breaking sales year in 2016.

Outlining plans for the firm to reinvent itself as a far-reaching mobility company in the wake of the dieselgate scandal, Muller revealed VW Group sold 10.3m cars in 2016, making it the world’s largest car manufacturer. It made €7.1bn euro (£6.2bn) in profit after allowances including €6.4bn (£5.6bn) of losses to cover dieselgate costs. In 2015 expenses relating to dieselgate amounted to €16.2bn (£14.2bn).

Most notably its sales in China, where the effects of the diesel crisis were negligible, grew 12.2%. 2017 sales revenues of €217.3bn (£190.4b) also exceeded forecasts by €4bn (£3.5bn).

“The last year was challenging yet remarkably successful,” said VW Group CEO Matthias Muller. “In 2016 we set the course for the biggest transformation in the history of the company - while at the same time performing better in our operating business than many thought possible.. Volkswagen is back on track.”

Muller vowed that the success would be a catalyst for further change, adding: “We will still be one of the most successful automakers in 2025. But we will also be a leading international provider of sustainable mobility and set the standard for new mobility services.”

New initiatives include a stated goal of taking leadership in the field of battery technology by 2025, when the VW Group has committed to have solid state batteries in production. These are seen as the next technological step over the lithium ion batteries currently favoured by most manufacturers. The VW Grioup has committed to have 30 battery-electric vehicles on sale by 2025.

He also signalled that Audi had been tasked with leading the Group’s autonomous driving projects, while adding that the VW Group now had 37 centres around the world working on autonomous and digital service ideas, pivoting around the Group’s new mobility company, Moia, which ws set up last year.

“Volkswagen is becoming faster, more focused and more customer-driven,” said Muller. “This will allow us to leverage the strengths of our multi-brand group much more effectively than in the past and to develop new and fascinating mobility solutions.”

Muller also highlighted recent joint ventures in China with FAW and JAC, the latter of which will lead to the co-development of a budget electric car line, Tata Motors in India and with Navistar in the American commercial vehicle segment as examples of the firm’s commitment to forging partnerships to boost sales success. He also confirmed that the first economy vehicles to be developed by the brand will go on sale in emerging markets in 2018.

Although company bosses stopped short of describing the affects of the dieselgate crisis as over, chief financial officer Frank Witter said: “Through agreements reached in North America we have taken a huge step to overcoming the diesel issue.”

Confirming Volkswagen was the worst-hit of the Group’s brands by dieselgate, sales revenue fell 0.6% to €105.7bn (£92.6bn), with a profit of €1.9bn (£1.6bn). Operating return was 1.8%, down from 2%.

Audi, Lamborghini and Ducati’s sales revenue were €59.3bn (£51.9bn), up 0.9bn (£800m), with a profit of €4.8bn (£4.2bn). Operating return was 8.2%, down from 8.8% as a result of costs associated to dieselgate.

Skoda increased sales by 9.8% to €13.7bn (£12.0bn), with profits rising 30.9% to €1.2bn (£1.1bn), with operating return up to 8.7% from 7.3%.

Seat’s sales revenue grew 3.8%, taking the company into €153m (£134m) profit for 2016, after losses in 2015. Operating return on sales was 1.7%.

Bentley sales revenue rose 4.9%, returning €112m (£98.1m) in profit. Operating return fell from 5.7% to 5.5% partly as a result of investing in Bentayga tooling.

Porsche sales revenue rose grew 3.6%, with operating profits up 13.9% to €3.9bn (£3.4bn). Operating return on sales rose from 15.8% to 17.4%.