Vw is raising its profit forecasts. Have you cleared the diesel air?


After two years of honing, there are signs that vw is overcoming its reputation and financial losses by leaking emissions tests.
The wolfsburg manufacturer said in November it would release a record car delivery this year and gain a higher annual profit. Vw also owns brands such as porsche, audi and bentley, and is expected to sell more than 6 million vw cars in China, Europe and the us this year.
It also said that the brand’s operating margins could rise between 4% and 5% by 2020 – still lagging behind rivals such as PSA group (PSA Peugeot Citroen) and Toyota (Toyota), but still beating expectations. The company, which came from a corporate scandal in 2015, had already used software to curb the emissions of nitrogen oxide during vehicle tests, a scam that affected 11 million vehicles.
The aftershock of the scandal continues, but the German car giant is expected to make more than 1.9 billion euros (1.7 billion pounds) in 2016. A growing number of lucrative sport-utility vehicles, such as Touareg, are pushing up yields.
Analysts and investors are increasingly optimistic about the outlook. Arndt Ellinghorst, senior managing director at Evercore, a financial consultancy, said: “it’s becoming more and more difficult for investors to ignore the impressive turnaround at Volkswagen.”
Investors have reacted to the news, with shares up 18 per cent in the past three months.
Although the scandal has triggered a financial crisis, Volkswagen has spent more than 25 billion euros so far and has been a major driver of the shift to electric vehicles. Costs include settlement of government and client litigation, repurchase and modification of affected vehicles. It also includes a criminal defense deal in the United States, a fine of $2.8 billion (2.1 billion pounds) and a civil penalty of $1.5 billion.

That has been a watershed year for the car industry, as rivals rush to jump on the power boom created by Elon Musk’s Tesla. Vw was late, but the so-called “chai gate” scandal forced it to accept new realities. France, Britain and the Dutch government have supported plans to ban diesel and petrol cars from between 2025 and 2040 to clean up polluted cities.
The fear of diesel’s death also seems to have hit buyers. Sales of new diesel cars fell more than 30 per cent year-on-year in November, according to motor manufacturers and traders’ association (SMMT). Volkswagen group can see the internal combustion engine writing on the wall.
The carmakers’ response was decisive. Paul Nieuwenhuis, a senior lecturer at the automotive industry research center at Cardiff university, says vw has had its worst year: “they are very resilient… Now the problem is really in the United States – because of litigation. ”
The carmaker and two of its top executives are still under investigation in Germany and face investor lawsuits in the us and mainland. Before the public the compliance chief executive Oliver Schmidt (Oliver Schmidt) this month in a conspiracy fraud the United States, and the other a violation of the Clean Air Act charges the be sentenced to fixed-term imprisonment of not more than seven years. Mr Schmidt admits he was taught to lie about the emissions of vw bosses.
He is the second plan for emissions involved in fraud and was sent to prison staff: Volkswagen an old engineer James beam was sentenced in August to 40 months, on suspicion of conspiracy and intrigue prosecutors. He has appealed his decision.
But despite the huge legal challenges facing the us, vw sales in the us rose 8.3 per cent year on year.
“The thing is, they just do the car,” Nieuwenhuis said. “It’s such a strong brand that people say ‘I buy golf because it’s worth it’.”