Volkswagen Reports Strong Q3 2017 Results As Volume Increases

by Trefis Team
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Volkswagen AG (OTCMKTS:VLKAY)reported its Q3 2017 results on October 27th and the company has proven once again that its emission scandal has not impacted revenues and growth. Volkswagen reported a nearly 6% growth in revenues (year on year) and a 15% growth in operating profit for Q3 2017, as deliveries to customers increased by 6% (year on year) in this quarter. The growth in operating profit is excluding special items which include a charge of 2.6 million euros relating to the diesel issue. While growth in Germany remained slow where customer confidence was shaken due to the diesel scandal, other regions have more than compensated for this sluggish growth, leading to an overall growth in revenues.

For the nine month period between January and September 2017, Volkswagen registered a 2.4% growth in passenger cars globally, as against a 3.2% growth in the industry. Europe and North America proved to be strong regions for Volkswagen’s growth in this period, with Asia-Pacific registering marginal growth. Below is a summary of Volkswagen’s regional performance between January and September 2017:

Growth in Western Europe was slower than the industry (2.8%) due to a change in the models of the company’s Golf and Polo cars and uncertainty around the driving ban for diesel vehicles. Further, the company has still not regained customer confidence in this region after the diesel scandal. Performance in Germany was most impacted where the company’s growth decreased by 2.2% compared to an industry growth of +2.2%. Volkswagen’s performance in the U.S. has remained strong where the company reported a 7.3% increase in units sales, despite a shrinking market for passenger cars. Its new Atlas SUV was well received in this market.

Volkswagen’s performance in Asia Pacific was impacted by the reorientation of its Audi brand in China. Strategic negotiations have been concluded and the company should see an uptrend in this model going forward. Disputes with dealers in China led to a decline in the company’s market share in the region to 11.8%.

Click here to see our complete analysis of Volkswagen and the contribution of Audi towards its revenues and profitability. Below is a summary of the performance of the company’s key passenger car brands in 2017:

Going Forward:

  • In 2017, Volkswagen expects its revenues to grow by more than 4% year on year amidst a challenging environment with growth in several regions slowing down and competition increasing. However, the company expects deliveries to be higher compared to the previous year, driven by growth in Eastern Europe and other emerging markets.
  • In 2017, Volkswagen expects its operating return on sales to exceed the original forecast range of 6%-7% (before adjustment of special items).
  • The company launched several new models in the first nine months of 2017 including SKODA’s innovative VISION E electric car concept which debuted in Europe and the expansion of its SUV range with the T-Roc. These “future” cars based on changing customer preferences are likely to drive growth for the company in the coming years.

Our current price estimate for Volkswagen is $34, slightly below the current market price.

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