Volkswagen Emissions Scandal
Volkswagen cars on a lot in Berlin Sean Gallup, Getty Images

VW Posts Biggest 2016 Sales Gain as China Offsets European Lag

Even while being battered by negative publicity related to investor lawsuits and company resignations, Volkswagen pushes on, with sales bumping up more than 7% in September.

Volkswagen AG posted its biggest monthly sales gain this year as a China surge offset both a drop in Brazil and eroding market share in Europe in a sign the automaker is overcoming its emissions-cheating scandal.

Volkswagen said worldwide sales jumped 7.1% in September to 947,600 vehicles, buoyed by strong demand for its Skoda brand. The namesake VW marque edged into positive territory for the first time this year, bolstered by a surge in deliveries in China last month.

“The increased deliveries make us optimistic we will be able to master the upcoming challenges,” Fred Kappler, Volkswagen’s head of sales, said in the statement. “Reinforcing our customers’ trust in our products remains our top priority.”

The manufacturer has been battling back from the crisis after admitting to cheating on emissions tests in September 2015 and tarnishing its image. In Europe, where about 8.5 million tainted cars were sold, Volkswagen has been losing ground to competitors, as rivals including Daimler AG and Fiat Chrysler Automobiles NV benefit from the loss of confidence. Last month, Volkswagen was battered by negative publicity related to investor lawsuits and the resignation of the head of development at the Audi luxury brand amid legal investigations.

Volkswagen accounted for 22.9% of European sales in September, down from 23.3% a year earlier, the European Automobile Manufacturers’ Association, or ACEA, said in a statement Friday. Its nine-month market share of 23.9% is the lowest since 2011. Volkswagen deliveries in the region rose 5.6% in September, compared with a gain of 7.3% to 1.5 million vehicles for the whole industry, ACEA said.

Still, those woes were offset by demand in China, where the diesel scandal is a non-issue because the technology doesn’t play a role for consumers. The group’s sales in the market, which accounts for more than one-third of global sales, jumped 20% to 382,300 vehicles. That more than offset a 59% plunge in Brazilian deliveries to 13,200.

Volkswagen shares, which have tumbled 26% since the cheating became public, rose 2.3% to 120.35 euros ($132.65) in early-afternoon Frankfurt trading, valuing the company at 63.8 billion euros ($70.32 billion).

Volkswagen’s recovery in Europe is hampered as concerns about the U.K.’s exit from the European Union and Deutsche Bank AG’s future cloud the region’s economic outlook. Auto manufacturers posted their first sales dip in almost three years in July, typically a weak month for the sector, and September’s gain came in below the 7.7% increase posted in the first nine months.

In the U.K, which exceeded Germany as the biggest European market in September due to a semiannual license plate change that prompts a demand surge, registrations in the month rose 1.6% to 469,696 autos. While that’s the highest level ever for a September, according to the Society of Motor Manufacturers and Traders, slowing gains in recent months indicate that uncertainty tied to the economic effects of Brexit is weighing on buyers.

“European automobile demand appears to have peaked,” analysts at Moody’s Investors Service, including Bruce Clark in New York, wrote in a report last week. “Manufacturers’ ambitious volume expectations for their new models will keep pricing pressure high and could result in discounts and incentives eroding profit margins and cash flows.”

By Dalia Fahmy, with assistance from Elisabeth Behrmann.

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