Volkswagen Shares On Monday Following China Deal News

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Volkswagen To Invest In Electric Vehicles in China

Shares in German carmaker Volkswagen are trading almost 3% higher pre-market on Monday. The market continues to digest the news that VW, along with three joint ventures, will invest around $17.44 billion in electric car access in China between now and 2024.

Volkswagen announced that itself and FAW Group, SAIC Motor and JAC, will manufacture a range of 15 different battery-electric or plug-in hybrid models in China by 2025. VW, which is based in Wolfsburg, said that it will commence manufacture of the electric vehicles using its established MEB architecture at two Chinese factories beginning next month.

Volkswagen To Pay Compensation Over Brazil Collusion

The company was recently in the headlines over reports that it had agreed to pay out compensation to former workers in Brazil. These workers had suffered during the military dictatorship there during the 1960s–1980s.

The results of an investigation commissioned by the Brazilian government found that Volkswagen was one of a number of firms which secretly colluded with the 1964 – 1985 military government to report suspected “subversives” and trade unionists. Many of whom were then beaten and tortured.

Commenting on the news, Hiltrud Werner, the head of integrity and legal affairs on the Volkswagen board of management, said:

“It is important to take a responsible attitude towards this negative chapter in the history of Brazil and to make pains to be transparent.”

Q2 Losses Not As Bad as Forecast

Volkswagen shares have now all but retraced the rally seen from mid-summer. This is in response to a better than expected set of Q2 earnings. Volkswagen reported second-quarter earnings per share of -$3.21. While still negative, it was better than the -$3.21 result expected.

The German carmaker reported a total after-tax loss of 1.54 billion EUR in Q2. This marks a distinct decline from the 4.1 billion EUR profit recorded over the same period last year. The company cited the sharp fall in demand seen amidst the COVID pandemic as the main reason for the loss. Volkswagen sold 35% fewer vehicles that it did over the same period last year.

Still Forecasting 2020 Net profit

Commenting on the results, the group’s Chief Financial Officer Frank Witter said:

“The first half of 2020 was one of the most challenging in the history of our company due to the COVID-19 pandemic”.

Witter went on to say:

“At the same time, we introduced comprehensive measures aimed at reducing costs and securing liquidity early on, which enabled us to limit the impact of the pandemic on our business to a certain degree.”

Despite the loss in Q2 Volkswagen is still forecasting a net-profit on the year as a whole.

Volkswagen Fails At Key Resistance

volkswagen shares

After breaking out above the bearish trend line from 2020 highs, Volkswagen shares once again failed to hold above the 146.56 resistance. They have since reversed lower. Price is now retesting the broken trend line, which is holding as support.

Below here, the next support to watch is the 125.02 region.

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