Successful 2019 for VW lays foundation for challenges ahead

Volkswagen AG performed well in 2019, but 2020 will be difficult for the German group as it speeds up its electrification and digitalization, said its chairman Herbert Diess.

"2020 will be a very difficult year. The corona pandemic presents us with unknown operational and financial challenges. At the same time, there are concerns about sustained economic impacts," he said at the group's annual conference on Tuesday.

Diess said Volkswagen is to stop production at its plants in Europe because of the novel coronavirus outbreak.

But he said the silver lining of the pandemic that has disrupted production and sales globally, is China's efforts and experiences in curbing its spread over the past weeks.

"We can fall back on the hygiene and organizational measures we learnt in China," he said at the conference.

The car group's operation in China, its most important market, is starting to get back to normal.

"With a few exceptions, our sites there (in China) have now resumed production. Deliveries are growing again in March and are beginning to normalize," Diess said.

One day later Diess shared a similar view on Sina Weibo, a Twitter-like platform in China.

He said in the post that Volkswagen has witnessed China's efforts and achievement in curbing the outbreak over the past weeks and the country is now reviving production, operations and logistics, paving the way for economic recovery.

"These efforts show that confronted with challenges, if we ensure our job now is well done, we can be positive about the future," Diess said.

Volkswagen is accelerating its transition into electrification and digitalization.

Diess called 2020 a watershed year with new CO2 targets put in place in the European Union. He said the most efficient way forward is to electrify its fleets of models.

The group has made great progress in e-mobility in the premium segment.

Since the end of 2018, Audi has sold over 32,000 e-tron SUVs, and the model has outpaced Tesla cars as the best-selling premium electric vehicle in Germany.

Porsche has launched the sportiest e-car on the market, the Taycan, and has received over 15,000 orders for the model.

The Taycan will be introduced into China in April and Audi will locally produce its e-tron in the country this year.

He said the group will advance this year into the volume segment with Volkswagen's ID.3 and ID.4 on the MEB platform, as well as further models from other brands including Skoda and SEAT.

"We are well positioned to tackle 2020 and 2021 with our product portfolio. All in all, we will have 15 e-models and 18 new plug-in hybrids on the market," Diess said.

To speed up its electrification, Volkswagen Group Components is undergoing transformation to produce electric motors, battery cells and systems.

Diess said Volkswagen is also stepping up efforts in terms of software, as the car is becoming a complex internet device, and generator and user of data.

The company has made some acquisitions, including WirelessCar, and partnered with Microsoft to establish a cloud-based platform.

Its newly established unit, Car Software Org, will bring together some 3,000 IT professionals and that number is expected to rise to more than 10,000 by 2025.

Volkswagen is planning to take a stake in Argo AI, which will be finished in the first half of 2020 to give it an edge in the race of autonomous vehicles.

Successful 2019

In comparison with 2020, 2019 was a very successful year for Volkswagen Group.

"We turned in a strong operating performance and laid vital groundwork. The Volkswagen Group was able to grow its sales revenue and increase its market share significantly," said Diess.

Despite the dip in the global auto market, Volkswagen's sales totaled 10.8 million with the revenue reaching 252.6 billion euros ($270.13 billion), up 7.1 percent year-on-year.

Its net cash flow rose to 10.8 billion euros, which Diess said will allow the group to press ahead resolutely in accomplishing its ambitious plans for the future.

He said strong brands, outstanding products and a powerful global sales organization are the bedrock of the car group's business.

Most of its brands and business units achieved substantial progress in their operating performance, Diess said.

Volkswagen Passenger Cars was the main contributor to the group. Its sales revenue in 2019 reached 88.4 billion euros, up 4.5 percent year-on-year.

Sports car maker Porsche's sales revenue grew by 10.1 percent to 26.1 billion euros, and its operating return on sales before special items was 16.2 percent, topping the list of brands in the group.

In its largest market of China, where car sales fell by 6.5 percent last year, car deliveries from the group's brands grew 0.6 percent to 4.23 million.

That meant a 20 percent market share, which was 1.4 percentage points higher than in 2018.

Diess said he was particularly satisfied with the new brand Jetta in China. Optimized for Chinese customers, the brand and its models have proven to be competitive in the market.