Record Volume Sales To Foster Volkswagen’s Growth In H1 2018

by Trefis Team
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Volkswagen AG (OTCMKTS: VLKAY) will report its half-yearly results on 1st August 2018 and conduct a conference call with analysts the same day. Strong volume sales realized by the company across regions and product groups are expected to result in enhanced revenue for the company during the period. However, higher input costs, specifically those related to commodities, might result in lowered margins for the company.

Volkswagen in 2018 reportedly had experienced the best first-half volumes in its history which are expected to enhance the company’s revenue substantially. Total customer deliveries in H1’18 increased by 7.1% on a year-on-year (y-o-y) basis, with double-digit volume growth experienced across Central and Eastern Europe and South America as these economies continued to recover and display strength. Volkswagen’s most optimistic region, China, also displayed a remarkable y-o-y growth rate of 9.2% as the company’s SUV and sedan variants remained highly received by the local customers in the region. Volkswagen additionally aims to launch 9 new models in its Chinese market in 2018, including 4 new generations of well-established sedan models. This is expected to continue and foster volume growth for the company in its key market.

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From a brand perspective, the company’s ŠKODA, SEAT, and MAN brands experienced a robust double-digit growth rate of 11.6%, 17.6%, and 24%, respectively. The company’s modern style and wide range of models were well received by customers globally, however, sales in the second half of the year are expected to be weak due to slower deliveries as a consequence of Worldwide harmonized Light vehicle Test Procedure (WLTP) introduced in the Europe Union (EU) which is expected to be effective from September 2018.

Additionally, the company is expected to face some cost headwinds broadly as a consequence of the recently imposed trade tariffs. Commodity prices in the U.S. have increased substantially in the second quarter as a result of the same and have been hitting the bottom line of major automobile players across the globe. We expect Volkswagen to experience a similar impact during the period. Furthermore, the company expects its R&D expenditure to remain high throughout 2018 especially with the company’s increased focus on in its e-mobility systems and new technologies.

Thus, the company is set to have a strong first half, backed by its higher volume sales. However, higher costs may dampen the company’s overall performance and profitability.


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