After seeing its sales slump in the country, Volkswagen faces an uncertain year in China.
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Volkswagen’s profits fell 30% in the first three months of the year despite solid business performance in Europe and North America. Slowing sales have hit the company's finances in China.
The German company said after-tax profit fell to 4.7 billion euros ($5.2 billion) from 6.7 billion euros during the first quarter of last year. The number of vehicles sold by the company also rose by 7.5% to 2.04 million. Revenue increased by 21.5%, to 76.2 billion euros, as VW saw strong demand and increased pricing power. The figures highlight that Chinese buyers need more convincing despite solid demand in the US and Europe.
Increasing sales from Tesla is one of the reasons. However, Volkswagen sold 14.5% fewer vehicles in China, with domestic competitors such as BYD grabbing a solid market share. BYD Auto moved ahead of Tesla for the first time in 2022 with sales of 1.9 million vehicles.
Volkswagen said it was “confident” that a broader range of models and more China-specific technologies would see deliveries “recover during the remainder of the year.” The company said it plans to invest 1 billion euros in an innovation hub in the Chinese city of Hefei. VW said it was moving ahead with its EV growth, selling 141,000 battery vehicles for 7% of total deliveries during the quarter.
Pressure Builds Up Against Volkswagen Group (VOW)
There were further problems for the company at its annual investor meeting, with activists protesting the company's record at its Xinjiang plant. Investors also criticised CEO Oliver Blume’s dual role as head of both Volkswagen and Porsche.
The company’s Xinjiang plant, a joint venture with SAIC Motor, has been a target for human rights activists and some large shareholders, including Deka Investment and Union Investment. Both urged the automaker to conduct an external independent audit of the plant in Xinjiang, where rights groups have documented human rights abuses, including mass internment camps, which China denied.
“Volkswagen must be certain that its supply chains are clean,” said Ingo Speich, head of corporate governance at Deka.
Investors also turned on the company for its slowing market share in China. They asked how the company would defend its market position.
