Volkswagen, the German car maker, reported that its profits dropped in the second quarter of the year. The company struggled with lower car sales and high costs related to restructuring.
From April to June, Volkswagen earned a net profit of 3.6 billion euros (about $3.9 billion). This was a 4.2% decrease compared to the same time last year.
Even though the company’s profits went down, its revenue increased by 4.1% to 80 billion euros. This rise in revenue was partly due to strong performance in its financial services division.
However, Volkswagen sold fewer cars, with deliveries dropping by 3.8% to 2.2 million vehicles. While sales went up in Western Europe and North and South America, there was a significant 19% drop in sales in China, which is a crucial market for Volkswagen. The company faces tough competition from local Chinese carmakers.
Sales of Volkswagen’s less expensive brands, like Seat and Skoda, increased, but the sales of its more expensive brands, such as Audi and Porsche, fell.
The company also faced higher fixed costs, unexpected charges, and extra expenses related to cutting jobs as part of its effort to reduce costs. These factors contributed to the lower profits.
Due to rising costs and slowing demand in China, Volkswagen adjusted its profit margin forecast. The company now expects an operating return on sales to be between 6.5% and 7.0%, down from the previous forecast of 7.0% to 7.5%.
Volkswagen had already announced plans last year to save 10 billion euros and to reduce its workforce over the next few years to improve its financial performance.
Looking ahead, Volkswagen still expects its revenue to grow by 5% in 2024. However, the company’s chief financial officer, Arno Antlitz, stated that Volkswagen needs to work hard on reducing costs in the second half of the year and beyond to meet its financial goals.
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