How did VW achieve record-breaking sales in 2019?
02 April 2020
2 April 2020
Volkswagen Group (VW) had a record-breaking 2019 according to their latest annual report. But which brand is responsible for this accomplishment? Are all of the divisions pulling their weight? Autovista Group Daily Brief journalist Tom Geggus breaks down the group’s brands to find the source of their successes and setbacks.
Speaking at a digital conference covering their annual report, Herbert Diess, VW’s chairman of the management board, told attendees that 2019 was a ′very successful year for Volkswagen Group’. While the global automotive market shrank by 4%, the manufacturer claims to have increased its sales revenue and market share.
Unit sales rose by about 56,000 to roughly 11 million in 2019, setting a new record for the group. This meant sales rose by 7.1% from €235.8 billion in 2018 to €252.6 billion last year. VW was able to generate an operating profit of €19.3 billion (before special items).
So, what was the secret behind VW’s record-breaking 2019? In short, selling cars which came with bigger price tags. ′We sold better equipped, more profitable cars at higher prices. And as a result, we strongly improved the quality of our business,’ Diess explained in the digital conference.
Bentley back in black
One of VW’s biggest 2019 success stories was Bentley’s return to profitability. This was quite a comeback for the luxury carmaker, who posted disappointing figures in previous years. Following these poor results, VW told the manufacturer it had two years to improve on its margins.
Bentley must have taken this deadline to heart as its sales revenue increased by 35.1% to approximately €2.1 billion in 2019 from €1.5 million in 2018. Deliveries rose by 4.9% to over 11,000 units from roughly 10,500 the year before. The carmaker increased production by 36.4% to over 12,000 last year, compared with 9,000 in 2018. This boiled down to an operating result of €65 million in 2019 compared with a loss of -€288 million in 2018.
Diess attributed this success to ′a streamlined efficiency programme.’ Higher sales also came as the result of the new Continental GT which helped it turn the tide on its margins. In fact, with 2,750 units, the convertible Continental GT was Bentley’s third most-produced car last year. In second place was the coupe version with over 3,900. Leading the pack was the Bentayga with more than 5,200 units produced in 2019.
′On 2019, our sales performance reached over 11,000 customer deliveries for the fourth time in our 100-year history, plus it represents the seventh consecutive year above 10,000 retail sales,’ a Bentley spokesperson told Autovista Group. They confirmed the launch of the Continental GT Convertible with its five major derivatives and limited-edition models was a big contributing factor. One of these special editions was the Continental GT Number 9 Edition by Mulliner, of which only 100 were made to celebrate the carmakers 100th anniversary.
Not all models helped push Bentley back into black however. The Flying Spur only saw roughly 100 units produced last year compared with over 1,600 in 2018. This puts the Spur in last place in terms of model production. Commenting on the manufacturers successful year a Bentley spokesperson said, ′it is remarkable that this achievement was largely without any sales of the Flying Spur which historically has contributed 20% of our annual sales.’
Porsche pushes profits
Another high-end brand helping boost VW’s profits is Porsche. Last year saw it revealed its first all-electric sports car, the Taycan. With this new model, ′Porsche demonstrates the huge performance potential in electrification,’ Diess said in the digital conference. Looking at the car’s stats, this is difficult to dispute. The Turbo S version has a range of up to 412km, can generate up to 560 kW and is capable of accelerating from 0 to 100 km/h in 2.8 seconds.
Diess confirmed the Taycan is making a big splash, with more than 15,000 customers already signing a purchase contract. With the production of this vehicle only just getting underway, only 1,386 vehicles were produced in 2019. Meanwhile Porsche’s most produced vehicle last year was the Cayenne, with more than 95,000 units.
The carmaker increased its deliveries to customers by 9.6% in 2019 to 281,000, compared with 256,000 the previous year. Vehicle sales rose by 9.6% to 277,000 in 2019 from 253,000 in 2018. Both the Macan and the Cayenne models were named in VW’s annual report as achieving particular growth. Porsche’s sales revenue increased by 10% to €26 billion from €23 billion in 2018. Operating profit picked up by 2.4% year-on-year to €4.2 billion (before special items).
Passenger car sales slowing
VW passenger cars sold just over 3.6 million vehicles last year, down on their 2018 performance (more than 3.7 million). In terms of operating result before special items, the marque reported €3.7 billion (compared with €3.2 billion the previous year).
Operating profit at Porsche came in at €4.2 billion (compared with €4.1 billion in 2018). Audi came in at €4.5 billion (down from €4.7 billion in 2018).
Audi delivered 1.8 million units in 2019, up 1.8% from 2018. Their most produced vehicle in 2019 was the A4 with over 323,000 units manufactured, down from roughly 344,000 in 2018. Whist not as high on the production figures list, possibly the most headline-grabbing vehicle for Audi last year was the e-Tron.
While it has been dogged by battery production issues, the e-Tron has garnered a lot of attention with order backlogs extending beyond the middle of the year. Since 2018 some 32,000 e-trons have been sold. In VW’s digital conference, Diess confirmed that this car is of great importance to the entire group. ′The Audi e-Tron proves that we have e-models that suit customers’ taste in the premium segment,’ Diess said.
With several noteworthy premium electric vehicles (EVs) on offer across its luxury brands, VW needs to turn its attention to more affordable electric options. By extending its reach beyond big budget cars, the carmaker could capture a greater market share of the ever-expanding EV segment. The ID.3 is being marketed as a cheaper alternative to vehicles with traditional engines, in terms of total cost of ownership. This could make the ID.3 an attractive option for consumers not wanting to spend e-Tron or Taycan money. The carmaker currently has 30,000 pre-orders for the ID.3 to fulfil across Europe.
But with COVID-19 continuing to impact demand and the supply chain, the mass-market EV faces a lot of hurdles. Frank Witter, VW’s chief financial officer was reported by the Financial Times to have said the carmaker is fighting to rollout the ID.3 by August. He did concede that they were ′a bit handcuffed’ by ongoing factory closures. Suspension of production at VW plants was recently extended until 19 April. This includes Zwickau, where the ID.3 is produced.
On top of this, the EV is suffering from major software issues, according to German newspaper SÜddeutsche Zeitung. Models that rolled out of the factory before the COVID-19 pandemic, aren’t apparently not equipped with the necessary operating system (OS) to run. So VW plans to introduce a basic version of the OS into the cars once finished. But the company is reportedly failing to attract the necessary software engineers to fix the multitude of issues.
With carmakers facing emissions fines potentially amounting to more than €20 billion if they don’t meet the mandated 95g/km target, VW needs to bring this more affordable EV to market. With COVID-19 devastating the global economy, relying on luxury-vehicle sales might not be an option for much longer.