Due to the supply chain shortage and global economic constraints, Volvo sales dwindled by 12% last year. This hasn’t affected revenue, which grew by 17%. But profit fell back, while the operational margin stuck to 3,2%. “This is not where we want to be,” commented CFO of Volvo, John Ekdahl.
In 2022, Volvo sold 615 000 cars, or 84 000 units less compared to the year before. The lower output is attributed almost entirely to the chip shortage. The falling numbers didn’t affect turnover, though. Revenue grew to 29,2 billion euros, representing an increase of 17%. Like other carmakers, mainly in the premium sector, Volvo managed to charge more per car and benefitted from favorable currency rates.
Polestar to the rescue
But that’s not the same as generating profits. Where brands like Mercedes or BMW managed to leverage theirs, this is not the case for the Swedish-Chinese car manufacturer.
Subtracting the added value generated by the stock market launch of sister brand Polestar, profit from its own operations took a dive of 15,7%. High lithium prices and semiconductor shopping in a turbulent climate have nibbled on the profits. But with the sale of Polestar added, profit was saved and grew by 10%.
Commenting on the operational margin, CEO of Volvo Jim Rowan said that he’s sticking to the target of reaching 8 to 10% by 2025. That’s more than double the number from last year (3,2%).
Prices of lithium going down
Volvo feels confident for the year to come. Based on the increased output from the final quarter of last year (December was the best month ever for Volvo’s car production), the company says that the chip crisis is easing and showing positive signs for the near future. The company also believes that the prices for lithium, a precious earth metal needed for battery production, will start to go down by the end of this year.
This might affect sticker prices. Previously, Volvo already announced that it wasn’t following Tesla in Ford in the EV price war. CEO of Volvo Jim Rowan has said that the price strategy for its zero-emission models wasn’t driven by demand.
But he added that if prices for raw materials were to be adjusted, this could indeed affect the strategy. The gross margin for electric Volvo cars is currently only 6%, compared to 22% for combustion-engined models.
EX30 to boost output
This year will also be important for Volvo’s growth path. The company intends to launch the EX30 in a few months. It’s a battery-powered compact crossover technically paired to the Smart #1 and the Zeekr X. This car must help propel output to 1,2 million vehicles annually or double the numbers registered last year.
Sitting on the SEA architecture, the EX30 will be built in China. Its length is expected to be between 4,2 and 4,3 meters, and it will feature a battery of 66 kWh capable of 440 kilometers.
As a conquest model, the EX30 must bring the average age of Volvo owners down by ten years. This less affluent target group, called Generation Z, will be met with a subscription model, with an estimated price of 600 to 700 euros.
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