Despite Dieselgate

VW Back in Pole Position

  • Why it matters

    Why it matters

    VW faces billions of euros in compensation as a result of Dieselgate but rising sales suggest that in the eyes of consumers around the world, its image hasn’t suffered a killer blow.

  • Facts

    Facts

    • VW looks set to increase its unit sales by over 3 percent to 10.2 million vehicles in 2016, which would make it the world’s largest automaker for the first time.
    • Falling sales in the United States, Russia and South America have been more than offset by growth in China and Europe.
    • Law services firm MyRight said it will file a lawsuit on January 3 seeking compensation for thousands of German customers affected by the emissions-rigging scandal.
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    Audio

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Starkes erstes Quartal fuer deutsche Autobauer
VW is polishing its image and polishing off the competition, despite Dieselgate. Source: AP

Despite Dieselgate, all signs are pointing to Volkswagen toppling Toyota as the world’s biggest automaker in 2016, with more than 10.2 million vehicles delivered. The German carmaker’s performance over the first 11 months has auto analysts convinced it’s just a matter of time before it becomes official.

“The VW group will end up clearly ahead of Toyota with its 10.1 million sold cars,” said Frank Schwope, auto analyst at NordLB bank in Hanover.

Arndt Ellinghorst of investment advisory firm Evercore ISI agrees. He expects VW to report sales of 10.2 million, which would mark a 3.3-percent rise from 2015.

Hitting that mark would put VW ahead of its Japanese rival for the year, heralding a change at the top of the global rankings for the first time since 2008.

General Motors, which held the top spot for seven decades until Toyota took over, is seen coming in third with just under 10 million sold.

All this despite a flurry of continuing negative headlines and costs stemming from Dieselgate, the massive scandal that broke in September 2015, when VW admitted it had manipulated some 11 million diesel cars around the world to cheat emissions tests.

VW itself is reticent about the looming change at the top. But since mid-December, when it released preliminary sales results for the first 11 months, it was pretty clear the Wolfsburg-based giant is heading for 10.2 million in total sales this year.

VW reported sales of just under 9.4 million cars from January to November, giving average monthly sales of around 850,000 vehicles. If VW reaches that average in December too, it will achieve total sales of 10.23 million vehicles for 2016.

Due to the Christmas holidays, the December figures will likely be slightly down from November, but VW’s sales in November were very strong at almost 900,000. So the expected Christmas slowdown will come from a very high level. That’s why, even if VW is only expected to have sold around 800,000 vehicles this month, it should still reach a record result for the full year.

There’s no question that the diesel emissions-rigging scandal has damaged VW this year, but only in certain markets – not everywhere. That’s the key to VW’s surprising success.

“China is simply the big compensating factor. Diesel doesn't play a role there so you can't lose any reputation there.”

Ferdinand Dudenhöffer, Professor of automotive economics at the University of Duisburg-Essen

Its business has been hit particularly hard in the United States, where the scandal first came to light, and where VW has this year sustained a 4.5-percent fall in sales. But then, VW was never strong in the United States, even before Dieselgate.

In Germany, sales have stagnated at last year’s level. Sales have also been very poor in Russia and South America, not because of Dieselgate but because of economic weakness in those countries.

But VW has more than offset these declines with increased exports to European countries, especially eastern Europe where its Czech unit Skoda has been particularly popular. VW’s commercial vehicles division, which makes the Crafter van, has also being doing well, increasing its sales by 11 percent so far this year.

But the biggest bump has come from Asia. The group’s sales success would not have been possible without the Chinese market this year.

VW doesn’t sell any diesel models in China, so its emissions scandal hasn’t had much impact on sales there. On the contrary: sales had increased 12 percent to almost 3.6 million vehicles by the end of November.

“China is simply the big compensating factor. Diesel doesn’t play a role there so you can’t lose any reputation there,” said Ferdinand Dudenhöffer, professor of automotive economics at the University of Duisburg-Essen. “China is the center of the automotive world, for VW too.”

VW’s arch rival Toyota, which topped the global ranking the last four years, has seen its unit sales stagnate at around 10 million annually for the last three years and recently said its 2016 sales likely fell to 10.09 million from 10.15 million in 2015. Its stagnation in 2016 was explained in part by problems with suppliers, which forced it to slow down production.

“Toyota is doing too many things wrong,” Mr. Dudenhöffer said. “The company is strong in its home market Japan and remains in a comparatively good position in the U.S. But Toyota’s heyday has passed.”

That goes for China, too. VW was strong and stable in China with its premium models Audi and Porsche, while Lexus, the premium brand of Toyota, was only strong in the United States, Mr. Dudenhöffer added. Nor has Toyota done a particularly good job of keeping up in the new technological races shaping the industry.

“Toyota used to be a leader with its hybrid model Prius but this car was developed 20 years ago. Toyota isn’t playing a prominent role with autonomous driving or electric cars,” he said.

Toyota became the world’s biggest automaker for the first time in 2008, supplanting GM which had held the title for more than 70 years.

VW’s former chief executive, Martin Winterkorn, ousted in September 2015 after the scandal broke, will likely be pleased with the news that his former company is set to take over the torch. That’s because he had set the goal of overtaking Toyota as the world’s biggest automaker by 2018. Mr. Winterkorn came close to his goal at the end of his tenure, even eclipsing Toyota over part of 2015, but never managing to beat the Japanese in annual sales.

The fact that this goal has likely been reached two years early is all the more surprising given that his successor, Matthias Müller, quickly declared the target obsolete and said the automaker must focus instead on sustainability and profits. It was a position that made sense given the massive costs facing VW over the Diesegate scandal.

Those costs may not be done yet. On Thursday, the legal services firm MyRight said it would file a lawsuit with the Braunschweig regional court on January 3, demanding compensation for thousands of German VW owners whose cars have declined in value as a result of the scandal. The firm said that 100,000 people affected by Dieselgate had registered on its website to get money back from VW.

Of the 11 million diesel vehicles fitted with the fraudulent software, 2.4 million are in Germany. VW has offered U.S. customers compensation, reaching settlements with U.S. authorities that will cost it around $16 billion. But it has so far steadfastly refused to compensate German or European customers, suggesting that any settlement on this side of the Atlantic could run the company into the ground.

 

Stefan Menzel is the managing editor of Handelsblatt’s website and closely follows the car industry. To contact the author: menzel@handelsblatt.com.

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