Volkswagen AG is the latest global automaker to emerge from the difficulties caused by the COVID-19 pandemic, reporting a third-quarter operating profit of $3.8 billion on revenue of $69.3 billion.
The results were off from year-ago results of $4.8 billion, but certainly and uptick compared with the company’s second quarter when it lost $1.7 billion due to slow sales in two of its three biggest markets: Europe and North America.
However, the positive result for the just-ended quarter came as a result of increased demand for luxury vehicles in China, which drove a 3% sales increase during the period. That push for big-money cars offset an overall 1.1% drop in overall sales. The want for vehicles in China is coming ahead of expected improvements in the U.S. and European markets where the pandemic is still crimping sales.
The strong quarter allowed Volkswagen to bank some cash, the automaker noting its net liquidity rose to $28.9 billion from $21.8 billion at the end of the second quarter.
China suffered through the problem first – it began there – and naturally emerged first. Things are much closer to normal there than in other markets. U.S. automakers are just now getting vehicle production levels back to pre-pandemic levels.
“(T)he clear recovery trend in the third quarter shows how robustly our company is positioned,” Volkswagen Chief Financial Officer Frank Witter said in a statement. Not only did we get a grip on the acute effects of the pandemic and achieved a return to profitability.”
However, the good news for VW is tempered by a second wave of COVID-19 cases in the U.S. and Europe. The latest revival of the coronavirus led governments in France and Germany to order their countries back into strict national lockdowns on Wednesday, Reuters reported.
“The coronavirus remains a central problem,” Witter said in a conference call with reporters. “This situation now is anything but relaxed.”
But Witter believes the automaker is well-positioned to handle future difficulties, in part because of the continuing demand for luxury vehicles as well as the implementation of cost-cutting measures it began earlier this year.
“In this challenging situation, we also succeeded in making significant progress in implementing our strategy, for example by further expanding e-mobility and strengthening our digital competence, and in maintaining the financial leeway required for the substantial investments in the future,” he said.
“Depending on the future course of the pandemic, we are cautiously optimistic that we will be able to continue to stabilize our business in the remaining months of the year and to put the Volkswagen Group on a sustainably firm footing for the future.”
Through the first nine months, the company delivered 6.5 million vehicles globally, which is down from 8 million for the same period last year — an 18.7% drop. Despite that, it managed to grab a little bit of market share, getting a 0.4 percentage-point increase to 13 percent.