Strong sales of high-end Porsches and Audis are limiting the damage the global chip shortage is doing to Volkswagen AG, leading Europe’s biggest carmaker to raise its profitability outlook for the year.

VW lifted its forecast operating return on sales for the second time this year, now to between 6 per cent to 7.5 per cent, thanks to booming demand for premium and high-spec models. Double-digit margins at Porsche and Audi have been making up for semiconductor scarcity that’s prompted the company to temper expectations for annual deliveries.

“We got through this quite positively in the first half, but we are going to see some hits in the third quarter because production now is really constrained,” Chief Executive Officer Herbert Diess said in an interview with Bloomberg Television. “We are confident that we can recover then in the fourth quarter.”

VW and peers including Daimler AG and Stellantis NV are posting robust results despite chip issues that have stymied assembly plants worldwide. Continuing to make solid profits will be crucial to financing VW’s plans to phase-out combustion engines and push into software, mobility services and automated-driving technology.

Tesla Inc., which VW aims to unseat as the leading EV maker, also has been picking up speed, with eight straight quarters of profit and margins that dwarf those of incumbent rivals. VW’s preferred shares were down 0.6 per cent as of 10 a.m. Thursday in Frankfurt trading.


VW’s adjusted operating profit of 11.4 billion euros (US$13.5 billion) in the first six months was ahead of the 10 billion euros it reported in the same period of 2019, before the pandemic. Faced with limitations on how many production lines they can keep running, automakers have shifted output to their most lucrative vehicles, and lower inventories are enabling them to command higher prices.

Automotive net cash flow climbed to about 10.2 billion euros in the first half, boosting VW’s ability to continue plowing money into investments in EVs and software development. The premium Audi and Porsche brands posted record deliveries for the first half of the year and operating margins of 11 per cent and 18 per cent, respectively.

What Bloomberg Intelligence Says

Volkswagen’s raised full-year Ebit margin guidance -- up 50 bps to 6-7.5 per cent -- appears conservative to us given the 8.8 per cent reported in 1H, though follows Mercedes in caution over potential 3Q semiconductor shortages. At the top end, 7.5 per cent implies only a 6 per cent 2H margin and, with consensus at 7.4 per cent, we anticipate marginal earnings upgrades.

-- Michael Dean, BI automotive analyst

The company tweaked its outlook for growth in deliveries this year to “noticeably” higher from “significantly.” Chief Financial Officer Arno Antlitz said the group expects an increase of about 10 per cent this year, portending a significant slowdown from the 28 per cent surge in the first half.

VW has lost production of a high six-digit number of vehicles so far due to the chip squeeze. The shortage has contributed to a slow start for VW’s important ID.4 electric SUV in China, stoking concern about the company’s operations in its largest sales region.


The carmaker in March mapped out plans to build six battery factories in Europe as part of a slick presentation on battery technology and a model lineup of about 50 purely battery-powered vehicles by 2030. Investors have cheered on the industry’s most comprehensive push to transition from combustion engines, bidding up VW’s common shares more than 60 per cent this year.

VW has budgeted 73 billion euros for electrification and digital offerings from this year through 2025, half of overall spending. As part of the expansion of services, the company on Wednesday reached a deal along with a consortium to buy back Europcar Mobility Group for 2.51 billion euros.

“We see the main benefit with the rental car business as the best starting point for offering mobility services,” Diess said.