Volkswagen is back on track - November 19, 2017
Volkswagen may have suffered the biggest scandal of its history with the dieselgate in 2015 but they seem to be back on track. For 2016 they reported record profits, and the first two quarters of 2017 have been great for them as well. Their stock prices are back from the serious fall caused by the scandal, too.
Two years ago, it turned out that Volkswagen (and others) cheated on diesel emission tests, causing a sector-wide scandal. The incident made many question the diesel technology altogether. Since then, several countries and cities are fighting against diesel engines. Athens, Madrid, Mexico City and Paris will ban them from 2025, for example, while China, Norway, India, France and Britain want to ban all combustion engine cars in the future.
Tragic consequences? Not so much
All this didn’t really matter to Volkswagen. To be more precise, it didn’t hurt Volkswagen AG’s (VAG) profits. This is the umbrella corporation which holds several other brands like Audi, Porsche, Lamborghini, SEAT and Ducati. Yes, Volkswagen as a brand may have suffered, but other divisions balanced that out.
In 2015, the company lost €1.3 billion, but last year, they were profitable again. They even exceeded their own revenue expectations by €4 billion. They had a total revenue of €217.3 billion and a taxed profit of €5.3 billion. This was greatly helped by reorganizations in the company and the great performance of divisions like Volkswagen Financial Services which made $2.27 billion, or Audi and Porsche which also had a really good last year.
What about this year?
Dieselgate isn’t over yet, or at least it still has some negative effects. VW may still have to pay for fines and buy-backs. But so far that has no effect on the company’s performance this year. On the contrary, they are breaking records again.
In the first quarter, they managed to reach a 10% higher revenue compared to the same period of 2016. What’s even more important, they managed to raise profits by 27%, which is a great result and in accordance with VAG’s plan to cut costs and grow profits. Although their second quarter wasn’t as stellar as the first, they still achieved better results than in the same period last year. The same can be said for their Q3 results.
Stocks are getting stronger too
After the dieselgate broke out Volkswagen’s stock prices took a huge hit. Prices fell 35% in just two weeks. This meant a breath-taking €26 billions loss from its market value and the company faces huge fines around €20 billions. However, it's worth to know that Volkswagen had €25-30 billions in cash reserves and equivalents so they had the financial power to cover the future fines.
Stock price since the scandal crawled back. It didn't reach the record highs around €260 of 2015 but it’s back right at the levels around €160-170 where the dieselgate hit the wires in Sept 2015, and it has the potential to rise further. This also shows how Volkswagen recovered from one of its biggest scandal ever, both in sales and stock price.
Still, it’s more and more obvious how authorities will fight against combustion engines. As seen above China, India and several Western countries are already plan on banning them. This makes automotive companies to spend more on developing alternative solutions, just as we predicted in 2015 after the scandal broke out.
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(Header image: 史莱克)