Tough Q4 Ahead, Volkswagen Warns, Despite €3.2 Billion Third-Quarter Profit

The Covid-19 skid stopped for the Volkswagen Group in the third quarter, with the German powerhouse flipping a horror start to the year into a €3.2 billion ($3.8 billion) profit.

Despite an 18-percent drop in its global deliveries to 6.5 million vehicles year-to-date, Volkswagen finished the third quarter strongly by doubling its free cash flow to €6.22 billion and lifting its automotive net liquidity to €24.85 billion.

Rising demand in post-Covid China has helped, too, though Volkswagen’s joint-venture sales there with SAIC and BAIC don’t end up on its operating profit line.

After a €1.7 billion loss in the second quarter this year, when Covid-19 poleaxed sales in its European citadel, its adjusted operating profit climbed to 5.4 percent, a near straight swap from its second-quarter loss of -5.8 percent.

Effectively, the Volkswagen Group made a profit of €1380 per car in the third quarter.

Volkswagen has been on a cost-cutting drive as well as trying to pump out as many electric car (BEV) and plug-in hybrid (PHEV) sales as it can before the EU’s tight emissions laws close a trap around it.

It sold more cars globally in September than it did in 2019, Volkswagen said, though sales revenues fell to €59.36 billion.

Still, Volkswagen warned that its full-year performance would be “severely lower” than in 2019, though assured that it would still be in the black.

“The coronavirus remains a central problem,” Volkswagen’s Chief Financial Officer Frank Witter said in a conference call. “This situation now is anything but relaxed.”

“The Volkswagen Group’s business continued to be heavily impacted by the Covid-19 pandemic in first nine months.

“At the same time, the clear recovery trend in the third quarter shows how robustly our company is positioned.

“Depending on the future course of the pandemic, we are cautiously optimistic that we will be able to continue to stabilize our business in the remaining months of the year and to put the Volkswagen Group on a sustainably firm footing for the future.”

The Group situation wasn’t as positive as the final figures suggest, largely because the Volkswagen brand lost a billion euros.

Porsche and Skoda continued to carry the burden of delivering the highest percentage of profit margin.