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VW Targets Higher Profit as E-Car Costs, Uncertainty Weigh

Christoph Rauwald

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Volkswagen AG’s namesake brand expects to lift profit margins over the next few years despite an expensive shift to electric cars and growing economic headwinds in Germany and abroad.

VW, in the midst of the auto industry’s most ambitious electric-car push, is sticking with a target of selling 1 million battery vehicles by 2025, Ralf Brandstaetter, the unit’s chief operating officer, told reporters on Thursday. The brand is sticking with a goal of 6% operating-profit margins in 2022, up from 5.2% in the first six months this year.

The sales goal, which would move VW well past Tesla Inc., “is the guiding star of our strategy,” Brandstaetter said.

Luring buyers toward e-cars -- from tech-savvy youngsters to traditional loyalists -- will be critical for the VW group to turn its 30 billion-euro ($33 billion) spending spree into a success and avoid steep European Union fines for breaching emission limits. Trade woes and recession fears are adding to the urgency and forcing VW to become more efficient after a decade of rising demand.

Economic swings are hard to predict and do pose a risk in coming months, Brandstaetter said -- from Brexit’s fallout to persistent tension between the U.S. and China.

“We’re monitoring the situation very closely,” he said. But VW’s broad global presence and economies of scale put the manufacturer in a better position than many rivals to cope with economic swings, he said.

While the manufacturer’s diesel-emission scandal caused a fundamental crisis, it also “became a catalyst for the transformation of Volkswagen,” Brandstaetter said. That set the stage for the bold plans under way now.

VW plans to use its vast scale to produce electric cars at more competitive costs than rivals. The brand, which accounts for about half of the group’s global deliveries, in the past has been bogged down by an unwieldy range of vehicle variants, bloated costs and poor budget discipline.

A new brand logo, which will be unveiled next month, can be displayed on car fronts as well as smartphone screens. It was last tweaked six years ago with a more three-dimensional look, and has changed only modestly since the manufacturer’s resurrection after World War II.

VW’s electric-car offensive starts with the rollout of the ID. 3 hatchback in Zwickau, Germany, later this year and will be followed by almost 70 more models across the group in the next 10 years. VW has taken desosits for 27,000 vehicles, and the brand’s sales chief, Juergen Stackmann said the number may well reach 30,000 in time for the Frankfurt auto show in September.

What Bloomberg Intelligence Says

“An initial push through Audi e-tron and Porsche Taycan could transform the company into the new Tesla, a view not yet shared by the market. Dedicated EV platforms should lead to a fundamental change in mix, much-needed scale and a cost advantage.”

-- Michael Dean, BI auto industry analyst

VW will roll out production of cars based on a new dedicated electric-car platform dubbed MEB, adding sites in China, Czech Republic and the U.S. VW has added 4 billion euros to its planned spending on IT projects as software will play an increasingly important role in future cars.

VW shares gained 1.6% to 144.26 euros as of 1:04 p.m. in Frankfurt. The stock is up 3.8% this year.

(Updates with sales goal for ID. 3 in third-to-last paragraph)

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