Volkswagen posts $13 billion profit; China auto sales up

Volkswagen first-half operating profit is expected to come in at around 11 billion euros ($13 billion), it said on Friday, even surpassing pre-pandemic levels on the back of strong demand in Europe and the United States.

The good result was driven in particular by demand for premium brands Porsche and Audi as well as the group’s financial services arm, Volkswagen said.

The Chinese market was slightly weaker in the period, it said, without specifying.

In the same period last year, Volkswagen posted an operating loss of 1.49 billion euros, burdened by the impact of the coronavirus crisis. In 2019, that result stood at around 9 billion.

Along with rivals, Volkswagen has also been hit by a global shortage of crucial semiconductors, and Europe’s largest carmaker said it now expected the main impact of the bottleneck to occur in the second half of the year.

Reported automotive net cash flow is expected to reach around 10 billion euros in the first six months, according to preliminary figures, up from the 5.57 billion in 2019 and the negative 4.8 billion last year. Volkswagen is scheduled to publish second-quarter results on July 29.

China’s auto sales up: China’s auto sales rose 27% in the first half of 2021 from a year earlier but still were below pre-pandemic levels, and production and sales fell in June due to global shortages of processor chips, an industry group reported Friday.

Sales of SUVs, sedans and minivans from January to June in the global industry’s biggest market rose to 10 million, the China Association of Automobile Manufacturers said. Total vehicle sales, including trucks and buses, rose 25.6% from a year earlier to 12.9 million.

Compared with pre-pandemic levels in 2019, passenger vehicle sales were off 1.4% in the first half, according to CAAM. Total vehicle sales were down 4.4%.

Passenger vehicle production fell 13.7% in June from a year earlier while sales were down 11.1% at 1.6 million.

Sales showed an “obvious decline after May,” CAAM said in a statement. “Passenger vehicles were mostly affected by an insufficient supply of chips.” China’s auto demand already was weakening due to consumer unease about slowing economic growth and a trade war with Washington before dealerships were shut last year to fight the virus outbreak.

China’s economy reopened relatively early after the ruling Communist Party declared victory over the virus in March. But passenger vehicle sales fell 22.4% in the first half of 2020, setting a low base for comparison this year. Annual sales in 2020 fell for a third year.

That is squeezing cash flow for global and Chinese automakers that are spending billions of dollars on electric vehicle development to meet government sales quotas.

This year’s demand was propped up by sales of electric and gasoline-electric hybrid vehicles, though they still are a fraction of the total.

EV sales in the first half of 2020 rose 200% to 1.2 million, but demand for them also is cooling, according to CAAM. Sales growth in June decelerated to 140% over a year earlier, hitting 256,000 vehicles.

Passenger car sales by Chinese brands in the first half of 2020 rose 46.8% from a year earlier to 4.2 million. Their market share rose 5.7 percentage points to 42%. Separately, Toyota Motor Corp’s political action committee will halt donations to US members of Congress who voted against President Joe Biden’s election certification in January, the company said on Thursday.

The largest Japanese automaker has faced harsh criticism for donations to some lawmakers - members of then-President Donald Trump’s Republican Party - who voted against certification of Biden’s win in some US states.

“We are actively listening to our stakeholders and, at this time, have decided to stop contributing to those members of Congress who contested the certification of certain states in the 2020 election,” the company said.

More than 535 people have been arrested and charged with joining a violent attack on the US Capitol on Jan. 6 in an unsuccessful attempt to stop Congress from certifying Biden’s election victory over Trump.

Citizens for Responsibility and Ethics in Washington (CREW) reported on June 23 that Toyota made $56,000 in total donations to 38 of the 147 Republican lawmakers who voted against Biden’s electoral certification and said it was the most any company directly contributed to lawmakers who opposed certification.

That disclosure and subsequent media coverage prompted a frenzy of criticism of Toyota, which had earlier defended the donations.

The Lincoln Project, a group largely of Republicans that are critical of Trump, on Thursday posted an ad calling out Toyota’s donations to those Republicans.

A Toyota spokesman did not say how long the contribution halt will last. The company noted its political action committee equally supports Republicans and Democrats and added the company “has long-standing relationships with Members of Congress across the political spectrum, especially those representing our US operations.” Many of Toyota’s auto plants are in southern states that are home to lawmakers who voted against Biden’s win.

Jordan Libowitz, a CREW spokesman, praised Toyota’s decision but said “it shouldn’t take a public pressure campaign to get them to do the right thing, but we’re glad it worked.”