May 5, 2023: German giant Volkswagen stated a drop in first-quarter profit on Thursday, saying weaker sales in China makes sure the need for the carmaker to shut the gap on its competitors in the country’s fast-increasing electric vehicle firm.

Volkswagen stated that operating profit decreased 31% to 5.7 billion euros ($6.3 billion) through the initial three months of 2023, from 8.3 billion euros during the same period in the previous year.

However, Europe’s biggest carmaker said operating profit before valuation effects from commodity hedging increased by 35% to 7.1 billion euros.

Volkswagen said that first-quarter sales revenue rose by 22% to 76 billion euros, primarily driven by a recovery in Europe and North American sales volumes.

“We had an encouraging start into the year 2023 indeed, with revenues and underlying operating profit improving hugely,” Volkswagen Chief Financial Officer Arno Antlitz stated on Thursday.

“As you remember, when we released our aims for 2023, they were quite, we got these reviews, but based on that excellent first quarter and related to an order backlog of 1.8 million vehicles in Europe, we are quite confident that we will get all our financial targets for 2023.”

Shares of Volkswagen were higher initially on Thursday. The stock price is up hit 5.5% year-to-date.

Volkswagen stated deliveries in China slipped 14.5% through the first three months of 2023. It remains confident sales will return through the remainder, citing an increased model range and China-specific technology.

Regarding the sliding first-quarter sales in China, Volkswagen’s answered Antlitz, “We had a slow beginning in China.”

He added it was essential to distinguish between China’s combustion engine business, where Volkswagen has long been a, and the country’s battery EV market, where it is willing to catch up with rivals, including Chinese EV company BYD.

“I just returned from Shanghai, I spent three days looking at competitor cars, which talks to the teams on the floor, and it’s obvious we must speed up, especially on the BEV side,” Antlitz said.

“I’m confident that we will also lay a major role in China in the future,” he added.