It’s been a tough couple of years for VW, thanks to a series of scandals that the readers of this website will only know too well. But the company has made some substantial changes, and it appears as if it might have come out the other side in even better shape.
During the emissions scandal, VW prepared for a fall in revenue as customers turned to more reputable brands. Soon the company was in full crisis mode, shedding employees and cutting costs left, right and center. But things at the car maker are looking up, thanks to a 44 percent jump in operating profits in the first quarter of the year.
VW’s success comes on the back of a strengthening global economy and good news for the car industry in general. Since the election of Donald Trump, demand has picked up across multiple industries and companies, and households are beginning to expect a return to growth and higher incomes in the future. The pro-business agenda has already seen other German car manufacturers get a jump in their profits and the process looks to be accelerating.
According to a press release issued by the company, VW made more than 869 million euros in the first quarter of the year which is nearly 800 million euros more than a year ago. The stock price of the company also jumped on the news which appears to show that VW has turned the corner and is now fast returning to profitability and regaining trust among the general public.
VW is hoping to build on this success with the release of the new Tiguan, a budget-oriented SUV. The old Tiguan was relatively cheap to insure, and people could pick up a car insurance quote for well under a thousand dollars. But VW is hoping that the new model will help to lower the costs of driving, even more, thanks to the extensive R&D the company has invested in safety technology and productivity.
Overall, the company is returning to health. The company wants to increase its operating profit margin to 4 percent by 2020 and to 6 percent by 2025. To do that, it’ll have to make its mark on the electric car market, the fastest growing segment of the industry.
The bad news for VW is that even though profits are up, it’s mostly come as a result of cost cutting with the company. Sales of cars actually declined for the group, suggesting that its brand may still be suffering from an image problem.
VW’s luxury car arm, Audi, is looking healthy. Despite the tarnishing of VW, consumers don’t view Audi in the same negative light. Operating profits at Audi stood at more than 1.3 billion last year and were 1.2 billion this year. This makes Audi VW’s prime profit contributor and most successful part of its business, especially among executive buyers.
According to the CEO of VW, Matthias Mueller, the group is now the largest car company in the world having eclipsed Toyota last year. As a result, what happens at VW affects the entire industry.