VW says shift to electric vehicles could hit profitability

BERLIN (Reuters) - Volkswagen said profitability could take a hit this year after posting record 2017 earnings on Friday, as the carmaker invests billions of euros in electric vehicles (EVs) and launches a raft of new models.

Europe's largest automotive group said it expects a return on sales for 2018 of between 6.5 and 7.5 percent before special items, after reaching 7.4 percent last year, and revenue to exceed 2017 levels by as much as 5 percent.

Volkswagen (VW) has been roiled by its "Dieselgate" emissions scandal that has inflicted about $30 billion in costs and fines just as it pushes billions of euros of investment into electric and self-driving cars.

The German group announced another 600 million euros ($738 million) in provisions on Friday related to the emissions trickery, raising the amount set aside last year to 3.2 billion euros.

In total, VW has assigned 25.8 billion euros to cover fines, compensation and vehicle refits, of which nearly 20 billion have so far been paid out.

"We must not relax our efforts because huge challenges lie ahead," finance chief Frank Witter said. "Shaping the group's transformation will not only require a great deal of time and energy, it will also be very expensive."

VW shares fell after the results and were trading down 0.6 percent at 162.8 euros at 1612 GMT.

Group operating profit after special items nearly doubled to a record 13.8 billion euros from 7.1 billion a year ago, VW said, helped by record sales of luxury Audis and Porsches but below the bottom-end forecast of 13.9 billion in a Reuters poll.

VW's emissions manipulations have not dented the carmaker's popularity among consumers. Group sales jumped 10 percent in January with demand up in all major world regions, after hitting a new record of 10.7 million vehicles in 2017.

($1 = 0.8127 euros)

(Reporting by Andreas Cremer; Editing by Maria Sheahan and Douglas Busvine)