March 14, 2018 / 9:25 AM / a year ago

VW brand says profitability drive faces cost risks

WOLFSBURG, Germany, March 14 (Reuters) - Volkswagen’s core autos division said costs for its electric-car programme, technology and a new emissions testing procedure will stand in the way of major profitability gains this year and in future.

VW’s namesake brand expects its operating profit margin to climb to between 4 and 5 percent this year, a range it is also targeting for 2020, the carmaker said on Wednesday.

Cost reductions, efforts to weed out complexity in parts and models and rising sales of higher-margin sport-utility vehicles helped to more than double the profitability benchmark to 4.1 percent last year.

But VW on Wednesday damped hopes for further significant profitability gains.

“This year and over the next few years, the brand will face severe challenges despite its improved competitiveness,” VW said, citing costs for electric cars, technology and the new WLTP testing procedure for emissions and fuel consumption. (Reporting by Andreas Cremer Editing by Victoria Bryan)

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