Though sales in Europe are at their lowest in 20 years, the Volkswagen Group reported an unexpected increase in quarterly earnings, attributed to new cost saving technology and strong sales at its luxury brands. VW operating profit was up to 3.44 billion euros ($4.56 billion) from 3.38 billion last year. Net income was 2.83 billion euros, down 50% because of a charge related to VW’s purchase of Porsche boosted last year’s net results. Revenue was up 9% to 52.1 billion euros.
Analysts had expected a slight drop in profits, after the previous quarter showed a 26% decline in operating profit.
Slow sales of mass market cars in Europe were more than offset by strong global demand for VAG’s Audi and Porsche brands, particularly in China. Audi is currently the VW group’s biggest moneymaker.
In coming quarters, VW expects to significantly reduce costs as it starts using its MQB modular architecture across its brands. Morgan Stanley expects the $70 billion investment to result in $19 billion in annual savings by 2019, increasing gross profit margins to 10%.