China drives Germans to new heights

GERMAN motor company profits soared in the first quarter of 2011 as the giant Chinese market’s love affair with Volkswagens, Audis and Mercedes-Benzes reached new heights.

Volkswagen Group, whose first quarter car sales in China leaped 20 per cent year on year, reported a Q1 net profit of €1.71 billion ($A2.3b) – an increase of 260 per cent on last year’s €473 million ($A639m) quarterly after-tax profit.

Daimler AG’s net profit almost doubled, to €1.18b ($A1.59b), as Chinese sales of its Mercedes-Benz vehicles rose 82 per cent to 48,861 units in the first three months of the year.

Both companies have reconfirmed their positive outlooks for 2011, with continued sales gains predicted as the world emerges from the worst of the global financial crisis.

VW chairman Martin Winterkorn said the company was continuing to power ahead.

“Volkswagen shifted into the fast lane in 2010 and that’s exactly where we intend to stay this year,” he said.

With expected sales of about eight million vehicles in 2011, the Wolfsburg-based conglomerate might take advantage of Toyota’s earthquake-hit production woes this year to slip into second place on the global rankings behind likely new leader General Motors.

VW Group sold 1.97 million vehicles globally in the first quarter (up 14 per cent), with more than a quarter of them – 548,400 units – going to customers in China.

From top: VW chairman Martin Winterkorn with the XL1 concept, Daimler AG chairman Dieter Zetsche, Renault chairman and CEO Carlos Ghosn.

Sales of Volkswagen-branded cars in the world’s biggest market were up 18.4 per cent to 429,515, while sales in China of VW’s premium brand, Audi, rose 24.6 per cent to 64,122.

VW Group’s sales revenues jumped 30 per cent compared with the first quarter of 2010, to €37.5 billion ($A50.7b).

Driven by increased demand for Polo, Tiguan, Jetta and Passat, the Volkswagen brand contributed €1.1b ($A1.5b) to the group’s operating profit, with Audi matching that figure, thanks mainly to increased demand for the Q5 and Q7 SUVs.

VW’s Czech brand, Skoda, continued to forge ahead with a €187 million ($A253m) profit on 181,000 sales.

The group’s Spanish operation, Seat, again ran at a loss, recording a €12 million ($A16.2m) operating deficit in the first quarter, but that was a marked improvement on the €110m ($A149m) loss in the first quarter of last year.

Porsche’s quarterly operating profit more than doubled to €496 million ($A670m), with sales revenue gaining 10 per cent to €2.28 billion ($A3.08b), mainly on the back of hot sales of the Cayenne SUV.

Daimler AG – maker of Mercedes-Benz and Smart vehicles – reported a 17 per cent lift in Q1 sales revenue compared with the same period last year, with a 15 per cent gain in vehicle sales, to 461,700 units.

The company said it is on target this year to sell “significantly more” vehicles than the 1.9 million units it dispatched in 2010, with Mercedes-Benz cars on track for a record 1.2 million vehicle sales in 2011.

The company said the new-generation C-class range and SLK roadster had been driving sales since late March, and this would be supported by the launch of a new C-class coupe in June, a new-model M-class in September and the roadster version of the SLS AMG in the fourth quarter.

Daimler AG chairman Dieter Zetsche described the company’s financial performance in the first quarter as excellent, adding that it put Daimler ahead of its planning.

“We are on the right track,” he said. “We want to delight our customers with fascinating products and strong brands, and we intend to continue our profitable growth.”

Across the border in France, Renault Group reported a 15 per cent jump in first-quarter revenue, to €1.04 billion ($A1.4b), thanks to record Q1 vehicles sales of 692,607 units – up 5.8 per cent of the same period of 2010.

Although European sales fell 3.7 per cent due to what Renault described as supply constraints, sales outside Europe accelerated 26.6 per cent to 259,308 units, more than making up the shortfall.

In its ‘Eurasia’ region, which includes Russia, Renault sales grew 88 per cent, while in the Americas, where Brazil is now Renault’s third-biggest market, sales soared 35.3 per cent.

Renault chairman and CEO Carlos Ghosn warned that further supply constraints might be experienced this year as the effects of the Japanese earthquake and tsunami continue to be felt.

However, he said the company was in a position to absorb the forecast impact of these constraints and was expecting to deliver both higher sales volumes and revenues in 2011.