Volkswagen's earnings were jolted due to the contention ensuing from the 'dieselgate' scandal
Volkswagen Reports Solid First-Quarter Performance Amidst Ongoing Dieselgate Scandal
Despite being plunged into its deepest-ever crisis due to the emissions-cheating scandal, German auto giant Volkswagen reported a "solid performance" in the first quarter of 2016.
Volkswagen sold 2.508 million units worldwide in the first quarter, marking a 0.8% increase. The company's key market in China saw a growth of 6.4%, while western Europe recorded a 2.6% rise in vehicle sales. However, sales in the US decreased by 5.7%, and deliveries in Brazil skidded by 37.6% due to the country's difficult economic situation. Sales in Russia also decreased by 15.5% due to the country's political situation.
The company's first-quarter performance has led to the confirmation of its forecast for the whole year, with an expected overall sales decline of up to 5%. Underlying or operating profit for Volkswagen rose by 3.4% to 3.44 billion euros in the first quarter.
However, the still incalculable costs of the affair, including regulatory fines and legal costs, pushed Volkswagen into the red for the first time in more than 20 years last year. The company suffered a 20.1% decrease in net profit to 2.31 billion euros in the first quarter, with a 3.4% decline in sales to 50.96 billion euros.
Analysts like Michael Punzet and Frank Schwope expressed skepticism about VW's optimistic outlook, suggesting that the final costs of the diesel scandal could be much larger. Frank Schwope, in particular, believes the provisions of 16.2 billion euros so far are at the lower limit of the overall costs, with his estimate for the overall costs being 20-30 billion euros. He believes that this range is more likely to be exceeded than undershot.
Despite these challenges, Matthias Mueller, the CEO of Volkswagen, expressed satisfaction with the company's solid performance. He stated, "We are very satisfied with the solid performance of our company in the first quarter of 2016 despite the challenges posed by the diesel scandal."
Frank Schwope maintained a 'hold' rating on the VW stock, while investors did not share Mueller's optimism, as VW shares were the biggest losers on the Frankfurt stock exchange on Tuesday. DZ Bank analyst Michael Punzet stated that they still expect additional burdens related to Dieselgate in 2016.
In conclusion, while Volkswagen reported a solid performance in the first quarter of 2016, the ongoing dieselgate scandal continues to pose significant challenges for the company. The final costs of the scandal remain uncertain, with analysts estimating them to be in the range of 20-30 billion euros.
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