(New: Share price, statements by finance chief, details.)

WOLFSBURG (dpa-AFX) - The violent price fluctuations for raw materials and growing competition in China keep Volkswagen under pressure. In the current business without these burdens, however, the group has been able to grow overall. Operating profit grew by 35 percent in the first quarter to around 7.1 billion euros, if the valuation of hedging transactions in materials purchasing is excluded. When these are taken into account, the picture looks different: Operating profit fell 31 percent to 5.7 billion euros, and the bottom line was left with just 4.7 billion euros, down from 6.7 billion euros at the start of 2022.

As the company reported on Thursday, the situation stabilized somewhat again despite ongoing supply difficulties in automotive electronics. Sales rose by almost 22 percent to 76 billion euros. The fact that many vehicle models also became more expensive in the wake of general inflation may have been a factor - the Wolfsburg-based company spoke of "improved price positioning."

CFO Arno Antlitz hinted that it would probably be difficult to pass on high expenditures for subcontracting to the finished cars. VW would therefore have to keep an eye on labor costs and productivity, he said.

VW's preferred share, which is listed on the Dax, was virtually flat at 124.40 euros in the afternoon. This year the share price has risen by almost seven percent, but twelve months ago the stock was worth more than it is at present. Goldman Sachs analyst George Galliers described the results as "solid," despite the charges from commodity hedging transactions. He said the volume and premium brand groups had performed unexpectedly well - though the company's expected decline in proportionate operating profit in China was not reassuring, given discussions about stronger competition in the People's Republic.

Sales were recovering in Europe and North America in particular, while the Volkswagen Group was experiencing significant problems in China. Antlitz nevertheless spoke of a "promising start to fiscal 2023." He said, "We are preparing for strong competition. But we also expect a strong second quarter."

The effects of cushioning increased procurement costs for basic resources and energy ("hedging") had still been positive in the first quarter of 2022 at 3.2 billion euros. Now this turned into the opposite in the books, impacting operating profit by 1.3 billion euros.

Due to the restrictions on global trade, particularly at the height of the Corona period, there had been a crack-up in the auto industry's supply chains. The situation recently eased somewhat. VW admitted to "continuing impairments" - nevertheless, the weak deliveries from the start of the previous year were improved in total by 7.5 percent to 2,041,000 cars. Production also picked up again after a manufacturing backlog had built up over the past two years due to supply bottlenecks for microchips and raw materials.

The Group fell short of expectations in China, which is by far the most important market. Sales there fell by 14.5 percent from January to March, and by even more for e-cars. The core brand VW Passenger Cars lost its market leadership for the first time in decades to the local electric rival BYD. The Germans recently lacked software and entertainment functions that appeal to the tastes of young customers.

New models and investments are intended to counteract this. "The overall market was down, and our volume was down," Antlitz said of the first three months. "We expect both to recover significantly over the course of the year." He said it is clear that Volkswagen needs to catch up in China - the finance chief cited autonomous driving, digital entertainment systems and "general speed" as key areas. "We are confident we can continue to play a significant role there in the future."

Global e-car business grew, with the group reporting a 42 percent increase to 141,000 units for the opening quarter. However, at just over 7 percent, the overall share is still relatively small.

According to experts, VW must become more effective in the development of self-programmed software. There have been major delays here - and the Porsche and Audi subsidiaries are going their own ways for the time being, contrary to the original plan. The launch of the Trinity car of the future, announced by the core brand, including its own electronics platform, has been postponed. It is still unclear whether a new plant will be needed for it.

The Cariad software unit widened its loss slightly in the first quarter compared with the same period last year, from 416 to 429 million euros. The group pointed to the high investment requirements. VW has budgeted billions for its battery cell plants in Europe and Canada.

The Premium brand group with Audi fell back in operating profit compared with the first three months of 2022, coming in at 1.8 billion euros, down from 3.5 billion at the time. However, the Ingolstadt-based company recorded an increase in sales. The Volume brand group, which includes the core VW Passenger Cars division, improved its operating profit from around 880 million to 1.7 billion euros, according to the latest figures. Porsche was also able to sell significantly more.

Many automakers had reserved scarce electronic parts for more expensive models. Microchip availability continues to be "limited, but it's getting better," Antlitz said. He estimates supply and demand here will come into rough balance in the third quarter.

The group left its outlook for 2023 unchanged. It previously calculated a 10 to 15 percent increase in sales and - thanks to full order books - an increase in deliveries to 9.5 million vehicles (previous year: 8.3 million). U.S. competitor Tesla, however, is also not only setting the pace with its new plant on the outskirts of Berlin, but is also putting competitors under pressure with price cuts./jap/men