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Despite Covid-19 Pandemic Volkswagen Reports Profits Of $12 Billion In 2020

Despite Covid-19 Pandemic Volkswagen Reports Profits Of $12 Billion In 2020
Despite the novel coronavirus pandemic in 2020 caused huge disruption to the global auto industry and upended supply chains of auto companies, the German car maker Volkswagen has ended the tormenting year with a profit of more than $12 billion.
Volkswagen is expecting to achieve operating profits of €10 billion ($12.2 billion) for 2020 because of a strong performance at the end of the year, the largest auto maker of the world said in a statement.
The company said that it "proved to be quite robust in the second half" of 2020 after the German company made a loss of €1.4 billion ($1.7 billion) in the first six months of 2020. It added in the statement that there was continuity of a strong recovery in its deliveries during the fought quarter of 2020 which was greater than the deliveries made by the company in the third quarter when its business started to recover from the pandemic hit.
In 2019 however, the profits of the company were almost double that of 2020 as the company had reported a profit of €19.3 billion ($23.5 billion) against a total sale revenues of €252 billion ($306.6 billion).
However the upbeat performance forecast for 2020 by Volkswagen pushed its shares by as much as 6 per cent which suggested that the investors were expecting a much larger fall in the company’s earnings for 2020.
During the early months of the pandemic, there was severe disruption in supply chains of car makers which resulted in a collapse in their sales globally. And currently the industry is facing a severe shortage of semiconductors consequently threatening production disruptions in an industry that is currently attempting to stage a recovery from the pandemic hit.
During the latest completed quarter, its production at plants in China, North America and Europe had to be adapted by Volkswagen. That production accounted for about 4 per cent of the total global quarterly output of the company. According to UBS analysts, that production hick up wa because of a shortage of components.
In 2020, the company "slightly expanded" its share of the worldwide passenger car market, said the German carmaker which is also the owner of the Audi and Porsche brands. The company managed to deliver 9.3 million vehicles which was 15.2 per cent less compared to 2019. In China, the single largest market of Volkswagen, deliveries were strong through 2020 with a fall of 9 per cent compared to a drop of 20 per cent in Europe compared to the previous year.
The company delivered 231,600 battery electric vehicles for 2020 which was three times greater than the deliveries made by the company in 2019. There was a 175 per cent growth in the delivery of plug-in hybrid vehicles with 190,500 deliveries.
Bernstein senior analyst Arndt Ellinghorst said in a note to clients that is looks like that traditional carmakers "can manage the transition to electric mobility much better than feared". "Investors need to wake up to the excessively low valuation of traditional car makers, especially in the context of valuation for everything 'new mobility,'" he added.
The market valuation of the United States based electric car maker Tesla is at $800 billion which is eight times the market capitalization of Volkswagen even though Tesla manufactured just 500,000 vehicles in 2020.

Christopher J. Mitchell

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