Volkswagen Group, Daimler AG and its Mercedes Benz luxury brand and BMW will have to focus on selling more to China in the coming years since it might take European demand for motor vehicles as long as 10 years to return to pre-COVID-19 levels.
The major German car makers, which were among the first foreign brands to sell and make their vehicles in China, are expected to do better in the changed, post-pandemic world than their local and international rivals because of this foresight.
"Among the major sales markets, China is likely to be the first to reach a moderate recovery path," said Prof. Ferdinand Dudenhöffer, founder and director of the Center Automotive Research (CAR) at the University of Duisburg-Essen, to CNN.
Dudenhöffer believes car sales in Europe will take at least 10 years to return to 2019 levels. This means China will become the locus of foreign car makers in the next decade.
Volkswagen Group, the largest automaker by worldwide sales, is especially keen on restarting its huge China business. China is the group's biggest market and delivers 40% of its sales and profits. Volkswagen also owns the Audi, Porsche and Seat brand.
Because of the immense demand destruction wrought by COVID-19, Volkswagen said deliveries to customers in China plummeted 35% in the first quarter after a steep decline in February. It expects "catch-up effects" in China through the rest of the year.
Volkswagen projects global demand for new vehicles this year to be 15% to 20% lower than in 2019. It also estimates Asia Pacific should perform better than other regions. Volkswagen Asia Pacific sales might see a decline of between 10% and 15%.
Volkswagen still expects to record an operating profit this year despite the "unprecedented crisis" triggered by the pandemic.
"The global Covid-19 pandemic substantially impacted our business in the first quarter," said Volkswagen CFO Frank Witter. "We've taken numerous countermeasures to cut costs and ensure liquidity and we continue to be robustly positioned financially. The Volkswagen Group is steering through this unprecedented crisis with focus and determination."
Volkswagen said first quarter operating profit plunged to $978 million (€904 million) from $978 million (€3.9 billion) year-on-year as vehicle sales wilted. It warned that profit for the full year 2020 will be considerably below 2019, but still positive. Volkswagen said group vehicle sales fell 25% to 1.9 million. Deliveries to customers were down 23% at 2 million.
On Wednesday, Daimler said it expects sales, revenue and earnings in 2020 to be far lower than 2019 due to the COVID-19. It admitted first quarter vehicle sales fell 17% to 644,300. Profit collapsed by 92% to $182 million (€168 million).
