Volkswagen Bucks Headwinds, Improves Profitability in 2021

Despite war in Europe and the ongoing global semiconductor shortage, the Volkswagen brand paints a positive picture of the future thanks to an extensive global production footprint. Indeed, last year it managed to up its revenues and profits while selling 8% fewer vehicles.

In a virtual media presentation, VW CEO Ralf Brandstätter says the brand’s global vehicle production capabilities helped greatly in achieving this feat, not the least being the turnaround of its North and South American operations that showed profits for the first time in decades.

But Brandstätter admits the semiconductor shortage remains a challenge, as is the potential impact of the Russian-Ukrainian war on the supply of vehicle wiring harnesses. But the automaker anticipates supply hubs in Africa and other locations will readily offset supplies of harnesses from VW’s major European hubs in Ukraine, Romania and Moldova.

Brandstätter tells journalists that overall revenues rose to €76 billion ($83 billion) with an operating profit of €2.5 billion ($2.7 billion). Much of this was thanks to production cost reductions that saved €1 billion ($1.1 billion) compared with 2019.

He says the scene is set for the German automaker to realize its ambition of transforming from just a hardware manufacturer into a digital services and mobility provider. Vehicles such as the battery-electric ID.4 have stood out, netting some 369,000 global sales and becoming a market leader in its segment in the U.S.

Brandstätter explains: “This is helping us to improve the customer experience. In Europe, over-the-air updates have been successfully rolled out and we have had more than 100,000 updates for our cars in the ID family.”

The approach has allowed the automaker to launch new consumer services such as short-term leases for ID.3 and ID.4 users.

“New business cases have become possible in Germany as we launched the Volkswagen AutoAbo subscription service which is meeting with resounding interest and acclaim,” Brandstätter says. “The users, by the way, are about 10 years younger than the traditional Volkswagen driver and this helps us tap into new customer groups.

“It is important that we control the interplay between technical development, the design, the model series and sales. In this way the vehicle becomes part of the digital world of our customers’ lives.”