VW on Target to Beat 2008 Sales in 2009; Prepares for Difficult 2010 Market

The Volkswagen (VW) Group has enjoyed another very strong month for global sales during November, with sales rising 19.1% year-on-year (y/y) during the period to 531,300 units. (compared to the figure of 446,000 units last year) However, it should be noted that this accelerated increase was partly as a result of a low y/y base level as a result of the onset of the global recession and the fact that November 2009 also benefited from one extra working day. The 2009 results also included Scania's sales results as well. However, even with all these factors taken into account there is little doubt that the VW Group has posted an extremely robust set of November sales results. The strong monthly figure also helped boost the company's year-to-date sales for the first 11 months of the year, which rose by 2% to 5.85 million units.

In the context of the highly difficult market environment that has been experienced in major vehicle markets in 2009 this is an exceptional performance, and it is one which has bettered the company's own forecasts. Detlef Wittig, Executive Vice-President, Group Sales and Marketing said, "We have exceeded our expectations so far this year. That shows our Group brands are on the right track with our environmentally-friendly model range tailored to the specific needs of the markets." However at the same time Wittig was careful to warn that the global vehicle market is likely to be in a worse shape in 2010 as there is little sign of a sustained organic recovery in many markets, while many of the scrappage schemes and tax incentive programmes that have boosted important markets for VW in 2009, such as Germany and Brazil, have already, or are due, to run out. Wittig added, "The coming year will be extremely difficult. Very different developments are expected on markets around the world. While the upward trend in China is anticipated to continue, we expect a marked decline on the European market in particular. So we cannot give the all-clear yet."

In November the VW Group's core markets including Brazil and Germany as mentioned above, and China, all continued to perform well. In China the company's products experienced a 72.9% y/y rise in sales to 133,700 units, in comparison to 77,300 units last year. The increase for the entire Asia-Pacific region was 68.9%, with deliveries totalling 146,500 units. Deliveries in the German market rose in line with global sales with an 18.6% y/y increase as volume was fuelled by the launch of the new Polo, while the sixth generation Golf also continued to generate strong demand. Deliveries across Western Europe were also up by 7.3% y/y although of course this result was heavily influenced by Germany, while the performance in other major Western European markets was less strong. Deliveries in the United States rose by 7.3% y/y, which was a very good performance in the context of an almost completely flat U.S. market during the month (see United States: 2 December 2009: U.S. Light-Vehicle Sales Flat in November, Market Showing Signs of Stabilising). In Brazil, sales rose by 26.7% y/y as showrooms were busy ahead of the vehicle excise tax cut ending. On many automotive markets, though, the situation is less positive and perhaps presented a more accurate picture of how things will look in 2010. Group deliveries in Central and Eastern Europe, for example, fell by 21.4% to 31,300 units. VW nevertheless performed significantly better than the total market in this region, which contracted by 41%.

The VW brand itself was the main catalyst for November's healthy overall growth level in November, with sales rising by a remarkable 25.8% y/y to 334,500 units. The brand's year-to-date (YTD) rise in sales for January-November stood at 9.8%, equating to 3.7 million units. The Golf has been the main catalyst for this sales growth, with the sixth generation being universally well received across global markets, while sales have also been supported by the launch of the new Polo in the third quarter, with brand sales rising in Germany by 30.2% y/y to 55,200 units as a result. The Chinese market has been buoyed by strong sales of the Lavida, Passat Lingyu and New Bora models. Audi experienced a strong result in November with sales rising 8.9% y/y to 82,760 units. Skoda also posted positive sales figures, with deliveries increasing by 26.0% y/y to 55,500 units, with the brand experiencing particularly strong results in Western Europe and India, with demand for the Fabia, Octavia and newly launched Yeti high. The SEAT also managed an 8% increase in deliveries to 27,900 units, although there is little doubt that the Spanish brand remains the weak link in the VW Group portfolio.

Outlook and Implications

Once more in November the VW Group showed that it has been the best performing major global OEM during the global recession that began at the end of the third quarter in 2008. To have managed to increase overall Group sales by 2% y/y during the first 11 months to 531,100 units is a stunning achievement but it is one which demonstrates the company's superior mix of vehicle brands, which covers the entire spectrum of the market, and the company's ongoing commitment to engineering quality and state-of-the-art, low-emission powertrains. The VW Group has also benefited from having a strong presence in the global markets that have best weathered the recession. Markets such as Germany, Brazil and China have been able to continue to post strong growth as a result of robust economic fundamentals and market stimulus packages such as the German scrappage scheme or the purchase tax breaks that have been offered in China and Brazil.

The VW Group is continuing to cement its position as the world's best placed OEM in terms of generating growth and increasing market share. Last week it announced that it will purchase a 19.9% stake in small carmaker Suzuki, which will give it vastly enhanced access to the Asian market, with particular reference to India. It could also act as a precursor to a full takeover of Suzuki which would add over 2 million units to the VW Group's annual sales and undoubtedly achieve its Strategy 2018 goal of overtaking Toyota as the world's biggest carmaker by 2018. The Suzuki purchase will also significantly help VW's ambitions in India where it is looking to grab an 8-10% share of the market in the next four to six years. VW launched the new Polo in India at the weekend, which will be built at the company's new production facility in Pune. VW is also addressing its relative weakness in the United States with a new production facility in Tennessee, which will manufacture a new bespoke sedan designed for the U.S. market (see United States: 8 October 2009: Volkswagen to Replace Passat with Tennessee-Made Sedan in U.S.). And while Toyota should be worried about the seemingly inexorable progress of its German rival, there is also little doubt that 2010's global market environment is likely to present a hard road. IHS Global Insight forecasts that VW's sales volume will contract by around 1.8% to 5.88 million units, while Toyota is actually forecast to resume growth next year.