Volkswagen cuts profit, sales forecasts as autos slump bites

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Volkswagen slashed its forecasts for operating profit and sales expansion on Monday because of a slump in demand for passenger cars, while keeping profit margin targets.

“It is fair to say that the very best of the party is over,” Chief Financial Officer Frank Witter informed analysts in a call to talk about the company’s outlook.

Volkswagen joins a string of automakers and providers such as Ford and Continental in warning of difficult times for an industry dealing with higher investments into cleaner and self-driving technologies at a time when a trade war between the US and China is curbing international growth.

Volkswagen now anticipates operating profit before special items to increase by at least 25% over 2016-2020, down from an earlier forecast of over 30%, presentation slides revealed.

The Wolfsburg-based company also clashed its forecast for sales growth over the period to 20% from over 25%.

The recent forecasts sent Volkswagen shares down 4% to 176 euros, finished with a 0.6% drop in Germany’s blue-chip DAX .GDAXI index.

The automaker has confirmed its targets for an operating margin of 6.5%-7.5% in 2019-2020 and 7%-8% in 2025.

To counter the cost of production of electric cars, the company will boost sales of higher-margin sport-utility vehicles and work on reducing the cost of producing electric vehicles, CEO Herbert Diess stated.

Volkswagen’s new ID.3 electric vehicle, for a name, Diess suggested to be 40% cheaper to build than the electric version of its Golf model.

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