Stuart Mitchell, manager of St. James's Place Continental European Fund (GB00B249JZ41) says that Volkswagen (Ger: VOW3) is benefiting from European quantitative easing. The German car company has restructured its business, making it one of the most profitable car groups.
He says: "German equities are emerging as the main beneficiaries of the European Central Bank's efforts to boost the region's economy and stave off deflation, with the DAX index recently breaking through and closing above the 12,000 barrier for the first time.
"Germany's leading companies were already receiving a big boost from low interest rates, falling oil prices, and a weaker euro that has increased their foreign-based revenues. The European Central Bank's quantitative easing programme has provided an extra shot in the arm to an economy that was already doing well. Strong share-price rallies have been seen by car companies including Volkswagen.
"European car sales are recovering sharply across the region. Volkswagen has been a significant beneficiary, with western Europe accounting for just under half of all its car deliveries. Over the years we have been very impressed by how successfully management has been able to restructure the business to create one of the most profitable car groups in the world. The company has also managed to build an enviable business in the emerging world. In China, for example, Volkswagen now has more than 1,300 dealers.
"German consumer confidence is at its highest level since 2006 and there are other indicators that the eurozone economy is moving towards full normalisation."
During 2014 Volkswagen strengthened its presence in China by extending its co-operation with joint venture partner First Automotive Works and by opening a new plant in Tianjin. It also says that in 2014 it generated double-digit growth in China, which is its largest single market.
Volkswagen reported an overall 2.8 per cent rise in its sales revenue for 2014, and a 19 per cent increase in profit before tax.
The company has 12 brands, which include Volkswagen, Audi, Bentley and Porsche.
