Volkswagen Group’s Actions to Reduce Pandemic Effects

Volkswagen Group presented on a statement the measures to reduce the effects of the COVID-19 pandemic, along with its 2Q20 results. "Business at the Volkswagen Group and its brands was strongly affected by the COVID-19 pandemic in the first half of 2020. Counter measures initiated at an early stage to reduce costs and safeguard liquidity were successful and therefore reduced the effects of the crisis," said the company.

The group’s sales revenue decreased by 23.2 percent to €96.1 billion (US$113.26). Deliveries during the first half of the year reduced by 27.4 percent to only 3.9 million vehicles compared to the 5.4 million delivered in the same period of 2019. The earnings before taxes of the group accounted to a negative €1.4 billion (US$1.65 billion).

The company affirmed that due to low demand levels, a stringent inventory management was implemented to reduce the effects of the crisis. Frank Witter, member of the Group Board of Management responsible for finance and IT affirmed on a statement that the first half of 2020 was one of the most challenging periods in the history of the company. “We introduced comprehensive measures aimed at reducing costs and securing liquidity early on, which enabled us to limit the impact of the pandemic on our business to a certain degree,” said Witter.

Despite low delivery figures, the group managed to expand its global passenger car market share. Volkswagen has experienced a slow recovery that is reflected in the consistent reduction of negative growth in year-on-year deliveries since May. For July, the group expects negative growth in deliveries to be a single digit percentage compared to July 2019. 

Other variables that the company is taking into account in its 2020-yearly estimates are competition intenstiy, foreign exchange markets, stringent emissions-related requirements and volatile commodities. The company expects the operating results for 2020 "to be severely lower than in the previous year albeit in positive territory," the company said on a statement.

The pandemic will hit Volkswagen Group's budget for R&D and CAPEX. "In the automotive division, the R&D ratio and ratio of CAPEX to sales revenue will exceed the previous year’s levels in 2020 due to lower demand and therefore considerably declining sales revenues," the company said.

Here are some key figures regarding the group's brand sales during 1H20. Notably, Audi's Q3, A6 and e-tron models recorded increasing demand.

• Volkswagen Passenger Cars - 1.1 million (39.8 percent less than in 1H19).
• Audi - 416,000 (34.1 percent less than in 1H19)
• Bentley - 4,569 (2.2 percent less than in 1H19)
• Volkswagen Commercial Vehicles - 157,000 (38.7 percent less than in 1H19)
• Scania - 31,000 (40.3 percent less than in 1H19)
• MAN Commercial Vehicles - 47,000 (34.1 percent less than in 1H19)

The company also announced that the Annual General Meeting will take place on Sept. 30, 2020 through a virtual platform. This meeting was originally scheduled for May and postponed due to the pandemic. Management has submitted an amended dividend proposal to be reviewed during the meeting.