What To Expect From Volkswagen’s Q1 2018 Results

by Trefis Team
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Volkswagen AG (OTCMKTS: VLKAY) will report its first-quarter results and conduct a conference call with analysts on April 26. Notably stronger sales volume of higher margin vehicles in the first-quarter are expected to result in increased revenue. However, the company expects to have a moderate 2018 with revenue expected to grow by 5% year-on-year (y-o-y) and operating margin to range between 6.5–7.5%, close to its 2017 figure.

Volkswagen posted strong sales volume in its first-quarter. Total deliveries to customers increased by 7.4% y-o-y, with double-digit growth experienced in China and Russia. Per the company’s 2018 outlook, Volkswagen expects a stronger demand to persist from Asia’s emerging economies as seen from the company’s first-quarter sales volume. The below graph has been created using our interactive platform.

From a brand perspective, the company experienced the strongest volume sales in Skoda, Seat, and  MAN. These brands experienced a double-digit growth rate in Q1, significantly contributing to the total sales volume. Volkswagen is particularly optimistic about its trucks and bus brand, MAN, which came into existence 3 years ago. The company expects stable growth from this variant across markets based on the current market factors. The company is currently looking for new financing opportunities for its future investments in this segment for it to expand even further.

The Chinese joint ventures (accounting for the majority of Volkswagen’s equity investments) also experienced record sales volume of 1.01 million vehicles in the first-quarter, reflecting a growth of 13.4% y-o-y. A large part of this growth is attributable to the increase in SUV sales in China which is expected to grow even further with 4 new SUV models expected to be available from the second half of 2018.

However, the company is expected to face some cost headwinds in 2018 with rising material prices partly as a consequence of the latest development in the steel market. Additionally, the company expects its R&D expenditure to remain high in 2018 with the company’s increased focus on investment in e-mobility and new technologies.

 

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