The German auto giant posted operating profit of $ 3.8 billion in the third quarter after a loss in the past three months. However, further virus bans could stifle recovery.

Volkswagen AG made a profit again in the third quarter and reflected the positive results of colleagues such as Daimler AG and Tesla Inc. The robust demand in China helped the auto industry cope with the aftermath of the Covid-19 pandemic.

Operating profit before special items was 3.2 billion euros ($ 3.8 billion), recovering from a loss in the second quarter, the company said in a statement on Thursday. Volkswagen also posted better than expected sales in the three months to September.

The world’s best-selling automaker benefited from its large presence in China, where sales have returned to pre-crisis levels. However, a second wave of infections in North America and Europe, including a partial lockdown in the home market of Germany, could lead to further recovery. Several competitors have indicated that the months ahead are difficult to predict after the coronavirus closed factories and showrooms as early as the second quarter, causing billions in losses.

VW’s positive results add to the growing evidence that the auto industry has handled the pandemic better than feared. Automakers from Ford Motor Co. to BMW AG and Fiat Chrysler Automobiles NV have reported better than expected results in the past few weeks. Toyota Motor Corp. announced earlier Thursday that global sales were up 2% in September compared to the same month last year, driven by strong demand in China and the US

Virus threat

In Europe, where VW operates most of its factories, the virus threatens again to curb sales. Germany and France have decided to contain the movement for at least a month, which is close to the strict spring lockdowns as Europe tries to limit the rapid spread of the virus. While bars, restaurants, and non-essential services will be closing in the region’s two largest economies, they will allow most businesses to operate.

Maintaining the extensive manufacturing network is vital for Volkswagen after introducing key models like the latest Golf hatchback and shipping the all-electric ID.3 to customers last month. The success of the ID.3 and its upcoming SUV sibling ID.4 is critical to kickstarting Volkswagen’s electric car push, the largest in the industry, after a bumpy start plagued by software problems.

Porsche, the financial services division and the Czech Skoda brand helped the group to a profit with positive operating results, while the main brand VW Passenger Cars continued to record losses in the first nine months of the year due to lower sales volumes and higher costs related to the diesel emissions scandal. Sales in the MAN truck business fell by almost a quarter by September, with deliveries by the Spanish car manufacturer Seat and the German luxury brand Audi also falling significantly.

Volkswagen stuck to its outlook from April, according to which global deliveries, sales and operating profit will decline “sharply” this year, but the manufacturer still expects a profit. The company’s operating result does not include the Chinese joint ventures, which are reported as the financial result.

Key meeting

“With a solid residual value trend, strongly increasing sales of electric vehicles and the busiest pipeline in the industry, we see VW as best positioned to outperform in the next 12 months,” said Patrick Hummel, analyst at UBS Group AG, on April 26th October An uptrend could come from additional cost-cutting initiatives and possible restructuring of the group’s niche brands, he said.

VW’s key stakeholders will meet for a closely watched board meeting next month to review the group’s rolling five-year investment plan, which is intended to reflect tighter budgets following the exacerbated global economic crisis by the pandemic. The urge of CEO Herbert Diess to concentrate the industrial giant more on its main brands VW, Audi and Porsche has increased the pressure on its smaller nameplates.

Bugatti has stopped plans for a new model and could be sold to the Croatian electric car specialist Rimac Automobili doo, in which Porsche holds a 15.5% stake, people familiar with the matter said in September. The powerful VW union leader and member of the supervisory board, Bernd Osterloh, pushed back against renewed speculation about a sale of the Ducati motorcycle brand. An earlier attempt was shot down three years ago by the unions and the Porsche and Piech family owners of VW.

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