Earnings

Volkswagen lifts margin target on demand for premium cars

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Key Points
  • Now expects operating margin of 5.5-7% in 2021
  • First quarter operating profit 4.9 billion euros versus 0.9 billion last year
  • Shares indicated 1.2% higher

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The logo of German car maker Volkswagen (VW) is seen at Northern Virginia dealer in Woodbridge, Virginia.
Paul J. Richards | AFP | Getty Images

Volkswagen, Europe's largest car maker, raised its operating margin target for 2021 on Thursday, pointing to stronger demand for more profitable cars in the first three months of the year.

The group now expects its operating profit margin to be 5.5-7% this year, versus a previous forecast for 5.0-6.5%, with vehicle deliveries and sales each up by more than a fifth.

The better outlook is mainly driven by improved demand for high-margin premium cars such as Porsche and Audi, a trend that has also been observed by rivals General Motors, Daimler and Ford and Stellantis.

"We started the year with great momentum and are on a strong operational course. This is clearly reflected in our positive quarterly figures," Volkswagen AG CEO Herbert Diess said.

"Our successful e-offensive continues to gain momentum and we have significantly expanded it with attractive new models."

Shares in the group were indicated to open 1.2% higher in pre-market trade.

Volkswagen's operating profit came in at 4.9 billion euros ($5.9 billion) in the first quarter to March, helped by cost cuts and higher sales, versus 0.9 billion in the same period last year that was impacted by the Covid-19 pandemic.

Its improved outlook for the year comes even though the car maker expects the impact of an ongoing shortage of crucial automotive chips to intensify in the second quarter.