Volkswagen Earnings to Be Hit by Delays in Meeting New Emissions Rules
Thousands of cars are yet to be certified under a new emissions regime that starts Saturday
BERLIN— Volkswagen AG VOW3 +0.42% on Thursday warned earnings could be hit by up to €1 billion ($1.17 billion) because of delays in certifying new vehicles to meet stricter European emissions testing rules.
Volkswagen’s namesake VW brand has an inventory backlog of tens of thousands of vehicles that haven’t yet been certified under a new emissions test that comes into force Saturday. The new test measures greenhouse-gas emissions and other tailpipe pollutants as well as fuel consumption and the range of new electric vehicles on a single charge.
So many cars are backlogged that Volkswagen has had to rent parking lots to store thousands of vehicles as they gradually move through the process.
News of the potential hit to third-quarter earnings, due to be released Oct. 30, initially prompted a 2% fall in Volkswagen’s stock. Shares recovered to trade slightly higher in early afternoon trading.
“The issue is painful but under control,” said Arndt Ellinghorst, analyst at Evercore ISI, a London-based brokerage, estimating that the VW brand’s profit margin would fall to 2% in the third quarter from 5.5% in the previous quarter.
In a conference call, Thomas Zahn, the head of sales and marketing for the VW brand in Germany, said the company had been slow to certify new vehicles because resources were being used to handle the fallout from its diesel-emissions scandal.
Volkswagen officials have said the company’s emissions-engineering teams have been preoccupied with the recall of nearly 11 million diesel vehicles, hampering their ability to get ready for the new European testing regime.
For weeks, Volkswagen’s testing treadmills have been running three shifts to get vehicles certified, Mr. Zahn said.
Volkswagen has previously said it would delay production of 200,000 to 250,000 vehicles this year because of the new rules.
The European Union accelerated efforts to tighten testing procedures for new vehicles in the wake of Volkswagen’s admission in 2015 that it had rigged millions of diesel vehicles to cheat emissions tests. One set of tests called the World Harmonized Light Vehicle Test Procedure, or WLTP, comes into effect Saturday, and consists of a new set of metrics for laboratory treadmill tests.
Another test, called Real Driving Emissions, uses a mobile tailpipe rig that measures pollutants in fumes coming straight out of the tailpipe during real road driving. It was this test, conducted by a group of West Virginia postgraduate students that first detected Volkswagen’s elaborate diesel-emissions cheating scheme that had been in place for nearly a decade.
Europe began requiring RDE testing on all new vehicles in September 2017 and allowable diesel pollutants will be tightened again in a second phase of the RDE testing program in 2020.
Over recent months the new WLTP standard has created a headache for other European car makers trying to make cars compliant before the Saturday deadline. Volkswagen and Daimler AG warned earlier this year the changeover could impact availability of some models and weigh on earnings.
Peugeot , Daimler’s Mercedes-Benz and BMW AG said this week that all vehicles on offer are ready for the standard.