Pole Position:UBS European Autos Daily

Volkswagen: January group sales fall 4% y/y.

    Volkswagen reported a 4.0% y/y global sales decline for January (+3.8% in FY16). Theweakness was caused by Audi (-13.5% - announced already) and VW brand (-4.9%),and regionally entirely by China (-14%). All other brands save MAN and all majorregions save Brazil grew at least by a mid-single-digit growth rate. The groupmoderately underperformed in Europe with 7% growth vs. c10% for the market.

    Our view.

    The weak start into 2017 was fully a result of the VW brand's and Audi's performancein China. While the VW brand underperformed the Chinese market marginally (-11.8%vs. -9.3% market retail sales), Audi suffered a 35.3% y/y drop in sales, which itattributed to a deceleration of Audi car sales by Audi/FAW dealers as they awaited theoutcome of strategic plan negotiations between Audi and JV partner FAW. As weexpect the Chinese market overall to rebound in February (one additional selling dayand reversal of the Chinese New Year effect that slowed sales in January), and Audi'sdealers to resume "normal operations", we expect a healthier February. On the positiveside, VW brand grew >17% in the US in January, SEAT achieved +16.5% global salesgrowth and the group saw +8.6% sales growth in South America – in spite of an 18%drop in Brazil. Russian sales also increased slightly by 1.3%. This overall solid volumemomentum should be supportive to Volkswagen's earnings growth, which we believeinvestors will put more focus on again now that the diesel issue tail-risks have largelydiminished. We remain buyers of VOW shares, and believe the next catalyst could bethe 24th February Supervisory Board meeting that we believe could result in a prereleaseof Q4 16 numbers.