The European economy has been crippled by the COVID-19 outbreak. Many economic sectors are incurring serious losses despite all their attempts to stay afloat. The car industry has not been spared as well. According to experts, European car manufacturers Volkswagen AG and Volvo AB will face serious financial problems due to the coronavirus epidemic.
Representatives of both companies confirmed that the consequences of COVID-19 will negatively affect sales and disrupt supply chains in the current year. Yet, Volkswagen AG and Volvo AB refrained from making long-term predictions. "The coronavirus pandemic presents us with unknown operational and financial challenges. At the same time, there are concerns about sustained economic impacts", Herbert Diess, Volkswagen's CEO pointed out.
On Tuesday, March 17, Volkswagen (VW) reported that it would suspend production at factories across Europe amid heightened uncertainty over car demand due to coronavirus.
Volkswagen revised its previous sales revenue forecasts. Previously, the figure was expected to rise by 4% in 2020. "The spread of coronavirus is currently impacting the global economy. It is uncertain how severely or for how long this will also affect the Volkswagen Group. Currently, it is almost impossible to make a reliable forecast", Chief Financial Officer Frank Witter stressed. He also added that the sales revenue for the first three months of 2020 may shrink by more than a half compared to the same period in 2019.
In the first quarter of last year, VW's operating profit before interest and taxes (EBIT) came in at $4.8 billion. In the first quarter of 2020, this figure will be half as low, Frank Witter noticed. Given the current situation, the company is doing its best in order to cope with the coronavirus impact on the European markets, Witter stated.
Notably, in 2019, the Volkswagen Group reported that its passenger car sales increased by 4.5%, Skoda sales by 14.5%, and Seat sales by 12.7%.
Volvo, the Swedish truck manufacturer, may be also cracked down by the negative financial consequences. Board of governors fears lower demand. The labor shortage is another risk factor for the manufacturer. Moreover, Volvo also finds it difficult to give its assessment of the situation.
Volvo emphasizes that the company and its suppliers are doing their best to alleviate the negative impact of COVID-19 on the production and sales of cars.
