VW achieves Strategy 2018 goal of selling 10 mil. units four years ahead of target

The Volkswagen (VW) Group has posted another record year of sales and achieved one of the main goals of its longstanding Strategy 2018 corporate plan by selling 10 million vehicles for the first time, with the Group's sales in 2014 rising by 4.2% year on year (y/y) to 10.14 million units, according to a company press release. This full-year tally follows a record December sales total of 881,000 units, which was a 2.7% y/y rise. Speaking at the North American International Auto Show (NAIAS) in Detroit, CEO Martin Winterkorn said, "In 2014, our Group delivered over ten million vehicles in total to customers, ranging from the e-up! city car to heavy commercial vehicles. That is impressive confirmation we are vigorously implementing our Strategy 2018 despite challenging market conditions. We are also making good progress with our other main goals – return on sales, customer satisfaction and top employer." Including heavy commercial vehicles (HCVs), the VW Group sold 3.95 million units in Europe, an increase of 5.1% y/y, with sales rising by 7.2% y/y in Western Europe to 2.03 million units (excluding Germany). In the Group's home market sales rose 4.5% y/y to 1.24 million units. In North America the Group posted a rise of 0.2% y/y to 891,900 units, despite challenges facing the main VW passenger car brand in the US, which declined 2% y/y during the year to 599,700 units. However, Group sales in South America fell significantly by 19.8% y/y due to the accelerated and ongoing contraction in the Brazilian market. The main growth catalyst was once more Asia-Pacific and more specifically China, with the company selling more than 4 million units in the region for the first time, with sales rising 11.6% y/y to 4.06 million units, of which 3.68 million (3.27 million; +12.4%) were delivered to customers in China.

Brand by brand

• Volkswagen passenger car brand: The Volkswagen (VW) passenger car brand has posted another new sales record in 2014 for the 10th year in succession, according to a company press release. The company stated that VW passenger car sales topped 6 million units for the first time during the year with a final sales tally of 6.12 million units. However, it adjusted its y/y sales comparison as a result of deliveries for 2013 being updated to reflect subsequent statistical trends. The Saveiro, which is mainly sold in South America, has therefore been included in deliveries for the VW Passenger Cars brand retroactively from 1 January 2013, meaning the uplift was in the region of 1.5% in 2014 in purely mathematical terms from 5.93 million units in 2013 to 6.02 million units. However, in December the VW brand declined 2.4% y/y to 529,500 units and this may point to slowing sales momentum in certain major global markets.
• Audi: The Group's main volume premium brand posted an very strong accelerated rise in sales during the year of 10.5% y/y to 1,741,100 units, which was the second highest y/y increase in the company's history. It posted an even higher increase in December of 14.7% y/y to 150,000 units. The company's market leading position in China was once more the main growth catalyst, with sales rising 17.7% y/y to 578,932 units, while US sales rose 15.2% y/y to 182,011 units. The company also enjoyed a massive 52% rise in sales of the A3 family, largely as a result of the A3 sedan having its first full year on sale while SUV sales were up 15% y/y.
• Skoda: Skoda sold more than 1 million units for the first time in 2014 with a combined global sales volume of 1,037,200 units which equated to a rise of 12.7% y/y, according to a company statement. It also reported its best ever December, with volumes during the month rising 16.7% y/y to 81,900 units. Commenting on the result Skoda CEO Winfried Vahland said, "The impact of the biggest model campaign in our company history is getting stronger and stronger. Since 2010, we have redesigned almost the entire model portfolio and expanded into new segments."
• Porsche: Porsche's sales rose by 17% y/y to 189,849 units in 2014 thanks to strong sales of its sport utility vehicle (SUV) ranges, including the brand new Macan, and robust growth in the Chinese market. It also finished the year with a record sales month for the Porsche brand, with sales rising by 39% y/y to 20,644 units. Around two-thirds of the company's total sales volume is now taken up by SUVs, with about 34,000 of the 45,000 customers who bought the Macan being new to the Porsche brand.
• SEAT: Even what has previously been the black sheep on the VW brand portfolio, SEAT, also enjoyed a strong double-digit increase in 2014 with the Spanish brand delivering 390,500 vehicles, which was a 10% y/y rise and its best result since 2007. The main catalyst for growth for the brand has been the new Leon range which was launched in 2012, with sales rising by 50% y/y in 2014 to 154,100 units , replacing the Ibiza as the brand's best-seller.
• Bentley: Bentley announced a 8.9% y/y improvement in deliveries during 2014 from 10,120 units to 11,020 units. Its biggest single region was the Americas, with deliveries increasing 1.4% y/y to 3,186 units, around 29% market share. However, bigger gains were recorded in its second largest market, China, where deliveries increased 21.9% y/y to 2,670 units.
• VW commercial vehicles: On a combined basis MAN, Scania and VW commercial vehicles delivered 646,500 (683,200; -5.4%) heavy and light commercial vehicles worldwide in 2014 against the backdrop of weaker developments in Europe, Russia and South America.

Outlook and implications

The VW Group's achievement in selling a total of more than 10 million units four years ahead of schedule is hugely impressive and shows the momentum that the firm currently has thanks to a number of key strategic advantages, most notably its enviable mix of high-quality brands and its market-leading position in China where its early entry into the market in the 1980s has increasingly stood it in good stead in recent years. VW now sells over one-third of its combined output in China and the territory is the main driver for VW's overall sales volume growth. Therefore VW remains more susceptible than most to any unforeseen macroeconomic shocks that should hit China, although it should obviously also be noted that any macro shocks that would have a significant effect on Chinese growth would by definition also have a huge impact on the wider global economy in this day and age so no major OEM would be left untouched by such a set of circumstances. However, according to IHS' latest Chinese short- and medium-term macro forecast there are concerns over the development of the Chinese economy moving into 2015, with the economy continuing to decelerate in the coming quarters. However, this is likely to lead to the Chinese government adopting more aggressive stimulus policies, should the economy continue to stumble, which is likely to guarantee continuing healthy short-term growth for OEMs in China, although the longer-term position is less certain. The Group will renew its emphasis on the main VW passenger car brand in 2015, with the lamentable operating margin of 2.9% recorded in 2013 being targeted for significant improvement. Given the brand still accounts for about 60% of overall Group sales, this is a logical and important focus. The brand will target a renewed push in North America and more specifically the US in the next few years, while at the same time looking to improve efficiencies and its cost base at its European production operations; (see Germany - United States: 12 January 2015: NAIAS 2015: VW passenger car sales pass 6 mil. units in 2014, Cross Coupé GTE concept shown in Detroit). For the full year, if Scania and MAN are stripped out, the Group's light-vehicle sales amount to 9.94 million units in 2014. IHS Automotive forecasts a mild uplift in LV sales in 2015 to 10.01 million units according to the latest IHS Automotive forecast, a far slower uplift than experienced in 2014 of around 0.7%.