Volvo Cars Q2 result sees full speed ahead

Volvo Cars reports a 39% increase in operating profits, excluding joint ventures and associates, to nearly NZ$1 billion (SEK6.4b) and a corresponding EBIT margin of 6.3% for the second quarter of 2023.

Q2 revenue was NZ$15.9b (SEK102.2b) with Q2 fully electric car sales share at 16% (7% in Q2 2022).

Sales of fully electric Volvo car models increased by 178% year-on-year during the quarter.

The Volvo EX90 and EX30 SUV models are not yet in production and have so far not contributed to the company’s 2023 performance.

Once these new cars hit the roads, they will further boost fully electric car sales towards Volvo Cars’ ambitious goal to sell only fully electric cars by 2030, says the brand.

While it delivered a higher percentage of fully electric cars during the quarter, the company’s margins on fully electric cars were impacted in this period because the lithium used in these cars was sourced when prices peaked during late 2022.

Additionally, as it introduced new model year 2024 fully electric cars with a considerably better range than existing models, Volvo Cars proactively shifted out the inventory of model year 2023 cars.

As the company enters the second half of 2023 it says this dynamic will change, since it will not only benefit from lower lithium prices but also realise the effects of increased pricing on MY2024 fully electric cars.

Therefore, margins on fully electric cars are expected to improve in the coming quarters.

Volvo Cars also recently revealed the fully electric EX30, its first small SUV, expected in New Zealand early next year.

The EX30 will also boost the company’s profitable growth in fully electric cars, with expected gross margins on the car in the range of 15 to 20%, says the brand.

Both the EX30 and the larger EX90 are exciting steps into the future and demonstrate Volvo Cars’ course towards premium electric cars, built on next-generation electric architectures with advanced battery and computing technology, as well as next-level passive and active safety features.

The company’s EBIT, including joint ventures and associates, reached NZ$778.3 million (SEK5b), which was lower compared to the corresponding period last year, mainly because group EBIT for the second quarter of 2022 was positively influenced by the one-time, non-recurring accounting effects of Polestar’s listing on the Nasdaq stock exchange in New York.

“The second quarter of 2023 shows that the year is shaping up as planned,” says Volvo Cars president and chief executive Jim Rowan.

“In these past three months we have continued to deliver on our ambitious transformation goals and made steady progress. At the same time, we also achieved a solid underlying business performance with increased sales and revenues,” he explains.

“We are performing and transforming, while navigating the external challenges that have come our way.”

The United Kingdom became Volvo Cars’ first market to fully transform from a traditional wholesale business to a direct consumer model designed around customer flexibility, with plans to make more markets fully direct.

It aims to have a more efficient and sustainable cost base for the future, by restructuring and changing ways of working in parts of the organisation, as well as focusing on securing the relevant skills it needs to be successful.

It also saw a solid global sales increase of 25% to 178,800 cars sold, a strong performance in electrified car sales, as well as continued premium pricing in many markets.

Production output improved with Volvo Cars producing 50% more cars in Q2 than in the same period last year as the company introduced steps to make its supply chain more resilient, such as broadening its supplier base, improving performance and delivery from its suppliers, developing direct relationships with key semi-conductor companies and foundries, and creating more transparency in the overall value chain.

CO2 emissions per car were 18.8% lower in Q2 compared with the company’s 2018 benchmark, supporting its mid-decade ambition of a 40% CO2 reduction per car.

This year is a crucial one in Volvo Cars’ transformation, with more new electric cars on the way and work ongoing on a new battery plant in Sweden and its planned new electric car factory in Slovakia.

It has opened a new Tech Hub in Krakow, Poland, which will complement existing ones in Stockholm and Lund in Sweden, and Bangalore in India.

Volvo Cars expects a solid double-digit growth in retail sales for the full year, along with the share of fully electric car sales to be even higher than last year’s full-year share of 11%.

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