Volkswagen's China Sales Drop After Coronavirus Shutdown

By William Boston 

BERLIN -- Volkswagen AG, the world's biggest car maker by sales, on Friday reported an 11% drop in sales in China in January, as the coronavirus outbreak begins to take a toll on the auto industry.

Auto manufacturers are deeply invested in China, and analysts say the virtual lockdown of some of the country's biggest cities in an effort to stop the virus from spreading is going to hit first-quarter sales and earnings hard.

The outbreak is the latest blow to an industry that was already reeling from a sharp slowdown in global demand last year, the huge cost of switching to electric vehicles, and increasingly onerous carbon emission legislation, particularly in Europe.

The disruptions caused by the virus have caused complications for globally connected manufacturers across industries, many of whom rely on at least some components made in China.

Volkswagen, whose brands sold in the market include the namesake VW marque, Audi, Porsche and Skoda, is China's largest foreign car maker. It sold 343,400 vehicles in China last month, down from 387,300 the year before.

In December, before the coronavirus caused auto makers to shut down China plants, Volkswagen deliveries to customers in the world's biggest car market by sales were up 17% from a year ago. VW's sales in China rose 0.6% to 4.2 million in 2019.

The news of the sharp fall in sales in the company's largest single market stole the momentum from VW's shares, which had been trading higher before Friday's news in Frankfurt. By early afternoon, VW shares were in retreat, trading nearly 1% lower.

Volkswagen operates nearly two dozen plants in China that produce more than four million vehicles a year. A shutdown of the plants until this week means that the company will likely produce hundreds of thousands fewer vehicles in the first three months of the year, and it is still unclear when China's auto market will return to normal. Volkswagen is planning to reactivate its plants next week.

VW said that world-wide sales fell 5.2% to 836,800 vehicles in January, with the strongest decline coming in China. Sales in North America were up nearly 5%.

Separately, French car maker Renault SA's interim CEO Clotilde Delbos said the company was "a little concerned" about future coronavirus developments, citing a decision to shut down its Korean plant for four days this week.

"We don't know yet what the impact is going to be. Nobody around the world knows how long this topic will impact us," she told analysts in Paris on Friday.

VW also continues to battle with the fallout from its 2015 diesel-emissions scandal. VW said that talks to settle the first major consumer lawsuit in the diesel affair had collapsed. VW said it had offered to settle the German case with a payment of EUR870 million ($943.3 million), but the agreement failed over a dispute over EUR50 million in plaintiff lawyer fees.

German consumer group VZBV disputes VW's explanation, saying there had been agreement on the legal fees but not about how the award would be distributed to plaintiffs.

So far, VW has paid around $30 billion in fines, penalties, legal fees, and to settle consumer litigation for compensation.

Nick Kostov contributed to this article

Write to William Boston at [e-mail]

(END) Dow Jones Newswires

February 14, 2020 10:24 ET (15:24 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.