VW's China prospects improve, global outlook still uncertain

German automaker Volkswagen said that its prospects are improving in China although the spread of COVID-19 makes it difficult to provide an outlook for its global performance in 2020.

In February, the company's sales dropped 74 percent year on year to 60,900 units in China. For the first two months, sales of Volkswagen vehicles declined 35 percent year on year to 404,300 units. 

Worldwide deliveries fell 25 percent to 546,300 vehicles last month and declined 14 percent to 1.38 million in the January-February period.

The decline is mainly due to the coronavirus pandemic: factories were closed and consumers were reluctant to leave their homes to purchase cars. 

Volkswagen CEO Herbert Diess said that the company sees potential for the Chinese market to recover over the remainder of the year.

Diess added that nearly all of VW’s Chinese plants are running and sales there are picking up. Volkswagen Group China and two of its joint ventures also donated 120 million yuan (US$17.1 million) in support of COVID-19 relief work.

Frank Schwope, an auto analyst at Nord LB, said in a note that February's sales performance in China is alarming. As COVID-19 has spread to Europe and the US, the situation seen in China could happen in other important country markets in March and April.

Last month, Volkswagen had predicted that the group's vehicle deliveries this year would be stable at 2019 levels and forecast an operating return on sales in the range of 6.5 percent to 7.5 percent in 2020.

Diess said on Tuesday, however, that "2020 is a very difficult year as COVID-19 presents car manufacturers with unknown operational and financial challenges. There are concerns about sustained economic impacts. Volkswagen will succeed in overcoming the corona crisis by pooling our strengths and with close cooperation and high morale in our Group."