VW Jumps After Forecasting Sales Surge on Order Backlog

Stefan Nicola, Bloomberg News

Employee conducts quality control checks on a Volkswagen AG (VW) ID.5 electric sports utility vehicle (eSUV) on the assembly line at the automaker's electric automobile plant in Zwickau, Germany, on Tuesday, April 26, 2022. The Zwickau assembly lines are the centerpiece of a plan by VW, the world's biggest automaker, to manufacture as many as 330,000 cars annually. , Bloomberg

(Bloomberg) -- Volkswagen AG expects to sidestep a slowing economy with a jump in sales this year as Europe’s biggest carmaker benefits from full order books and better access to semiconductors.

VW is projecting revenue to climb as much as 15%, with operating returns reaching as high as 8.5%. That margin would be roughly on par with last year’s result, even though easing supply snarls could put downward pressure on vehicle prices. The shares jumped the most in a year.

“We are in an industry that was heavily influenced by undersupply of semiconductors in the last two years,” Chief Financial Officer Arno Antlitz said on a call with reporters Friday. “We expect that undersupply to ease, but that’s true for every competitor — so we expect not only a better supply situation but also increased competition.”

Mercedes-Benz AG, Renault SA and Stellantis NV reported healthy profits in the past weeks on high prices and orders they accumulated during the height of the supply-chain crisis. The strong results come amid concerns over waning demand later this year as record inflation and slowing economies increasingly squeeze car buyers.

VW shares soared as much as 11.3%, the steepest intraday gain since March 9, 2022. They’re up roughly a fifth this year.

VW is working through a number of hurdles in the shift to electric cars, which accounted for 7% of group deliveries last year. Chief Executive Officer Oliver Blume, in the top spot since September, is under pressure to revamp the company’s software push and defend VW’s position in its biggest market China against home-grown manufacturers.

“We have a slowdown in the economy and expect demand growth to moderate,” said Antlitz. “We have to maintain our pricing discipline and be stronger on our cost side in order to compensate for headwinds as well as higher material costs.”

Read more: VW Sees €3.6 Billion Cash Gap as Logistics Woes Cause Glut

The German company proposed a dividend of €8.70 ($9.24) per ordinary share and €8.76 per preferred share, a €1.20-per-share increase over last year’s payout.

While returns are strong for now, carmakers continue to battle supply-chain snarls. Thousands of unsold vehicles and unused raw materials have been piling up at plants in Europe because of truck and train shortages. The problems have prompted Stellantis and Renault to try to recruit truck drivers among their factory workers.

Still Looking

VW remains in “constructive talks” about building a battery plant in North America, but hasn’t made a final decision, said Antlitz, with US green tech subsidies acting as a tailwind for the process. The facility is part of a push to bolster market share in the US and become less reliant on China, where VW last year sold just under 40% of its vehicles.

“We have the possibility to enlarge our global footprint even faster in the US with the Inflation Reduction Act,” he said. “It’s very good timing for us, as we want to grow in the US.”

--With assistance from Monica Raymunt and Craig Trudell.

(Updates with CFO comment starting in third paragraph)