VW Group boosts revenue as U.S., Europe offset China slide

Volkswagen Group reported increased first-quarter revenue after strong demand in the U.S. and Europe helped to offset a slide in sales in China.

Revenue rose 22 percent to 76 billion euros ($84 billion) in the quarter, VW Group said in a statement on Thursday.

Operating profit fell to 5.7 billion euros from 8.3 billion after last year's first-quarter profit was boosted by commodity hedging. Last year’s result was inflated by a surge in value of the company’s nickel hedges. Excluding the valuation effect from commodity hedging, operating profit rose by 35 percent to 7.1 billion euros, yielding a margin of 9.3 percent.

Cariad, the carmaker's beleaguered software unit, made a loss of 400 million euros.

Group vehicle deliveries in the first quarter increased 7.5 percent to 2.04 million. Deliveries of battery-electric cars were 141,000, representing a share of around 7 percent of total deliveries.

In China, VW's biggest market, sales fell by 15 percent and Chief Financial Officer Arno Antlitz said that the carmaker had work to do to catch up with domestic competitors on battery-electric vehicles. "Competition will intensify with more chips and more availability," Antlitz said on a media call.

Asked how VW would respond to the wave of electric vehicle price cuts, Antlitz said: "Our focus is on quality of the business, rather than on volume. This is specifically true for EVs... we don't want to lose our margin parity target out of sight."

VW aims to achieve the same margin from combustion engine cars as EVs, though the latter are still far more expensive to produce, in part because of high prices of raw materials.

The automaker confirmed its annual outlook of a return on sales of 7.5 percent to 8.5 percent, pointing to a high order book of 1.8 million vehicles, including 260,000 battery-electric cars.

China woes

VW Group sales in China are sliding even as the broader market recovers.

Its share of joint-venture operating profit in China fell by almost a quarter to 625 million euros ($690 million) during the first quarter, VW said during Thursday's results presentation. For the year, profit in the country is expected to fall by about 14 percent to 2.8 billion euros.

Antlitz said. "We won't give up on China. We have a strong position in combustion-engine cars, we are accelerating and catching up."

VW dominated the world’s biggest car market for well over two decades but is struggling to keep up with a slew of local EV manufacturers that are taking large chunks of market share.

Sales of locally made hybrid and full-electric cars are booming in China, with deliveries from biggest EV maker BYD leapfrogging VW during the first quarter.

To lessen its dependence on a single market, VW has stepped up moves to gain market share in the U.S., where its namesake brand is an also-ran. The company plans to build a new plant in South Carolina to make electric trucks and SUVs under the Scout nameplate and is investing 4.8 billion euros to build a battery plant in Canada, its first outside of Europe.

Reuters and Bloomberg contributed to this report