Premium cars lift Volkswagen's margins despite chip woes

Premium cars lift Volkswagen's margins despite chip woes

Premium cars lift Volkswagen's margins despite chip woes© Reuters. FILE PHOTO: A Volkswagen logo is seen as it launches its ID.6 and ID.6 CROZZ SUV at a world premiere ahead of the Shanghai Auto Show, in Shanghai, China April 18, 2021. REUTERS/Aly Song

By Christoph Steitz and Jan Schwartz

FRANKFURT (Reuters) – Volkswagen (DE:) raised its operating margin target for this year after strong demand for profitable Audis and Porsches in the first quarter, but warned it remained in “crisis mode” over a global shortage of semiconductor chips.

Europe’s biggest carmaker said on Thursday it now expected an operating profit margin of 5.5-7% this year, versus a previous forecast of 5.0-6.5%, with vehicle deliveries and sales both up by more than a fifth.

The better guidance is mainly driven by improved demand for high-margin premium cars, a trend also seen at General Motors (NYSE:), Daimler (OTC:), Ford and Stellantis.

That helped the group cushion the impact of a shortage of automotive chips, which it warned would intensify in the second quarter.

Chief Executive Herbert Diess said the problem had cut production by around 100,000 cars in the first quarter, and there was more to come.

“We’re still tasking our supply chain people to recover the losses of quarter two, which we expect,” he said.

Volkswagen shares were flat.

To try to secure supplies over the longer-term, the German group is talking directly to chipmakers including NXP Semiconductors (NASDAQ:) and Infineon (OTC:), as well as foundries such as Taiwan Semiconductor Manufacturing Co, Diess said.

“We are, for sure, in crisis mode,” he said.

During the first quarter, deliveries of Porsches and Audis both rose about a third year on year, Volkswagen has said. Sales of electric vehicles more than doubled to 133,300 vehicles.

The world’s second largest carmaker by vehicle sales cheered investors earlier this year when it provided more detail about its electric vehicle strategy, including higher sales targets and plans to build six battery factories in Europe.

Volkswagen’s operating profit came in at 4.8 billion euros ($ 5.8 billion) in January-March, helped by cost cuts and higher sales, versus 900 million euros in the same period last year, which was hit by the COVID-19 pandemic.

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Author: Reuters
This post originally appeared on Stock Market News

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