Demand from China drives up VW profits to highest level in two years
Published 30/07/2010 | 05:00
Volkswagen AG reported its biggest quarterly profit in two years due to demand in China.
Second-quarter operating profit in China, VW's largest market since 2009, rose from €193m to €518m, according to figures released by the Germany-based company yesterday. Net income in the period quadrupled to €1.25bn.
CEO Martin Winterkorn needs China to help achieve his goal of surpassing Toyota Motor Corp in sales and profitability, by 2018. In the past two months, he announced plans to build two new plants in China to double production capacity.
"China has become hugely important for VW's business targets," said Frank Biller, a Stuttgart-based analyst with Landesbank Baden-Wuerttemberg, who recommends buying the stock.
Volkswagen, the first carmaker to enter the Chinese market, three decades ago, is counting on the country to offset stagnating European sales, where the end of government scrappage schemes is hitting demand.
Revenue and operating profit this year will be "significantly higher' than in 2009, Volkswagen said yesterday, as China boosts the carmaker to record deliveries in 2010. VW's China sales advanced 46pc to 950,729 vehicles, accounting for 26pc of deliveries worldwide.