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Friday, 27 July, 2001, 11:48 GMT 12:48 UK
VW profits accelerate
New VW Beetle
VW predicts a healthy year for sales and profits
Europe's biggest car maker Volkswagen has reported an increase in pre-tax profits of 16% in the first six months of 2001 and gave a confident assessment for the rest of the year.

The company reported a profit of 1.5bn euros ($1.32bn), fulfilling an earlier forecast of strong sales and reiterating its expectation that full-year profits will be higher than last year's 3.47bn euros.

VW is pinning its hopes on robust growth in North America and the Asia-Pacific region.

"We expect the decline in sales in Germany due to the weaker than expected auto market will be offset in the second half of 2001 by higher sales abroad," said the company in a statement.

Demand in Germany, which makes up about 20% of VW sales, fell 3% in the first half of the year, according to the German motor trade group VDA.

Market dominance

Car makers like VW are seen to be more sensitive to economic fluctuations than the luxury brands because they have smaller profit margins and experience more volatile demand.

Audi A2
Audi enjoys consistent demand
But VW benefits from its dominance in Germany and Europe in the diesel market and consistent demand for its Audi luxury brand.

VW also said cost-cutting measures would help to compensate for weak domestic sales.

The company's second quarter profits, before tax, increased by 17% from the previous year to 805m euros.

French rivals

French automaker PSA Peugeot Citroen also reported strong first-half profits on Thursday, benefiting from the popularity of its new cars.

However, its domestic peer Renault, which suffers from an ageing model line-up, reported a fall.

Peugeot, Europe's second largest car maker, confirmed its 2001 sales and earnings targets after reporting a 36% rise in first-half profit.

Renault's first-half profit tumbled to 304m euros from 1.15bn a year earlier.

See also:

20 Feb 01 | Business
VW reports record profits
30 May 01 | Business
VW fined 31m euros
08 May 01 | Business
Happy motoring for VW
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