VW has posted its monthly sales decline since December 2010, suffering from the slowdown in China while Russia and South America also act as a drag.
IHS Automotive perspective | |
Significance | The VW Group posted the first overall monthly sales decline for 4.5 years during April with a 1.3% y/y decline to 852,300 units, according to a company statement. |
Implications | VW narrowly maintained positive sales growth for the first four months of the year with a 1.0% y/y increase to 3.34 million units, although the April slowdown was affected by the Chinese market losing momentum, which also affected the negative sales growth of the VW passenger car brand during the month. |
Outlook | This overall decline will be of concern to VW's management and means more negative publicity after the board room clash between CEO Martin Winterkorn and Ferdinand Piëch which led to the latter stepping down as supervisory board chairman. However, such has been VW's massive success in recent years that its sales base levels are high and it was inevitable that any slowdown in China would hit headline sales figures, while Russia and South America are also starting to bite. |
The Volkswagen (VW) Group has posted its first monthly sales decline in April in 4.5 years, according to a Reuters report that cited a company statement. Total sales for the month fell by 1.3% year on year (y/y) to 853,200 units with the slowing of momentum in China, and the difficult market situations in Russia and Brazil taking their toll. Reuters said that the last time VW had posted a monthly sales decline was in December 2010 when the firm was recovering from the volatility created by the global financial crisis which was precipitated by the collapse of the Lehman Brothers. In brand terms, the main catalyst for the decline was the main VW passenger car brand, which accounts for around 60% of overall VW group sales, falling by 4.8% y/y during April. In the year to date (YTD), VW managed to maintain positive growth with sales rising by 1% y/y to 3.34 million units between January and April. Commenting on the company's April and YTD results, board member for sales and marketing Christian Klingler said, "The start to the second quarter highlights the mixed market trends in the different regions. While we are experiencing a tailwind in Western Europe and North America and have been able to grow Group deliveries – in some cases quite significantly – in those regions, the situation in South America and in Eastern Europe – where the trend is primarily driven by market developments in Russia – remains challenging. We continue to focus on qualitative growth. With its twelve brands, the Volkswagen Group is excellently positioned to achieve that."
In the YTD the Group posted an improvement in Europe, with a 3.8% y/y rise in sales to 1.38 million units, with the main area of growth being Western Europe which rose 6.3% y/y to 747,000 units. The market has also developed extremely positively in the company's home market of Germany, with a rise of 8.0% y/y in the first four months of the year. However, this was counterbalanced by a 11.6% y/y decline in Central and Eastern Europe, while the bloodbath in Russia continued with a 38.8% y/y fall in sales to 57,600 units. The South American region was also a big contributor to downward pressure on the firm's sales, with a 20.7% y/y fall to 200,400 units during the four months, of this amount 143,800 units were sold in Brazil, a 26.7% y/y decline. The Group delivered an increase of 4.3% y/y to 284,300 units in the North America region from January to April, of which 184,000 were handed over to customers in the United States, which was a 0.2% y/y contraction.
However, the biggest influence on the Group's slowing sales momentum was China, where there was only a 0.2% y/y increase in sales in the first four months of the year, to 1.19 million units.
Brand by brand
The Volkswagen (VW) passenger car brand recorded its worst monthly performance in for some time after posting a 4.8% y/y fall in sales during April to 496,100 units, according to a company statement. for the first third of the year the company posted a slower rate of decline of 2.2% y/y to 1.98 million unit.
Audi's global sales growth has slowed in April to just 2.5% year on year (y/y) to 152,850 units, according to a company statement. Despite the slowdown in overall growth, the brand still managed to increase its sales in all its major sales regions. April's result dragged the year-to-date (YTD) result down by a degree with sales increasing in the first third of the year by 5.2% y/y to 591,050 units.
Porsche's deliveries rose by 31.7% y/y in April to 21,469 units, according to a company statement. This almost exactly matched the 32.0% y/y increase in sales that the company posted in the first third of the year to 72,571 units. European sales enjoyed a 16.3% y/y uplift in April to 7,356 units, although this was down on the 39% y/y increase in the first four months to 24,769 units. The April result and the YTD tallies were both records and reflected the incredible success of the new Macan which has now come on stream in all Porsche's major regional markets.
Skoda sold 92,100 units in April, according to a company statement. The OEM's April volumes climbed 2.8% y/y from 89,600 units in the same month last year.
SEAT handed over 138,400 vehicles to customers worldwide in the first four months a rise of 8.6% y/y. VW Commercial Vehicles delivered 147,500 vehicles during the same period which was a rise of 4.9%. The MAN brand delivered 30,300 (36.600; -17.3%) units from January to April while Scania delivered 24,100 heavy trucks and buses to customers in the period to April which was a fall of 2,3% y/y.
Outlook and implications
It will be of concern to the firm's management that the VW Group has posted this first overall monthly sales decline since December 2010 in the weeks following the high-profile boardroom battle between CEO Martin Winterkorn and Ferdinand Piëch who was forced out of his role at the company's supervisory board chairman as a result after publicly withdrawing his backing off Winterkorn (see Germany: 27 April 2015: Ferdinand Piëch resigns as VW's supervisory board chairman after spat with CEO backfires). After years of positive press generated by accelerated sales growth, particularly at its volume premium car unit Audi, and record profits it adds to a growing narrative of negative publicity surrounding the group. This has affected the investor view of the company and the share price has fallen 11% since the end of April to EUR220. However, it would be foolish to be too caught up in this narrative as the fundamentals of the business are still very strong and it would be unwise to bet against its long-term target of becoming the world's undisputed number one carmaker in terms of sales volumes. There is no doubt that the performance of the main VW passenger car brand is becoming an increasing concern for Winterkorn and his lieutenants. Indeed, this subject was alleged to be one of the core bones of contention between Winterkorn and Piëch. The decline of 4.8% y/y in sales in April is worrying but also unsurprising given the brand's dependence on the Chinese market which is slowing significantly after years of growth (see China 15 May 2015: VW reports 7.5% y/y decline in Chinese sales during April amid slowing demand, BMW up only 0.6%). Key to Winterkorn's short-term strategy for the company is to improve the operating margin of the VW passenger car brand from 2.4% in 2014 to a medium term target of 6%, although it should also be said that the firm's Chinese sales are not included in this figure as they are accounted for in the equity method.