Volvo Cars reported a 39% increase in operating profits, excluding joint ventures and associates, and a corresponding EBIT margin of 6,3% for the second quarter of 2023.

Regarding its operational performance during the second quarter, Volvo Cars recorded an increase of 43% versus the same period in 2022. It also saw a solid global sales increase of 25% to 178 800 cars sold, a strong performance in electrified car sales, and continued premium pricing in many markets.

“The second quarter of 2023 shows that the year is shaping up as planned,” said CEO 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 achieved a solid underlying business performance with increased sales and revenues. We are performing and transforming while navigating the external challenges that have come our way,” he added.

16% fully electric, margins to be improved

During Q2, the company reported a strong sales performance in electric cars. Sales of fully electric Volvo car models increased by 178% year-on-year during the quarter, accounting for 16% of its total share.

The company’s newly launched fully electric cars – the Volvo EX90 and EX30 SUV models – are not yet in production and should boost fully electric car sales further in the coming years.

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

As the company enters the second half of 2023, this dynamic will change since it will benefit from lower lithium prices and realize the effects of increased pricing on MY2024 fully electric cars. Therefore, margins on fully electric cars are expected to improve in the coming quarters.

Commercial transformation

Volvo Cars continued its commercial transformation this past quarter. In June, the United Kingdom became its first market to fully transform from a traditional wholesale business to a direct consumer model with more flexibility for the customer.

The knowledge it gains from the UK commercial transformation will be crucial as the company plans to make more markets fully direct in the coming years, together with its trusted retail partners. The aim is to improve the overall customer experience and make its commercial network more efficient, transparent, and cost-effective.

In May, Volvo Cars also increased the focus on the global cost optimization and resource efficiency initiative it launched late last year. This included a global redundancy program, including around 1 300 office-based positions in Sweden, as part of efforts to reduce costs and drive efficiencies across its global operations.

The aim is to establish a more efficient and sustainable cost base for the future by restructuring and changing ways of working in parts of the organization and focusing even more on securing the relevant skills it needs to succeed.

Looking ahead

2023 remains a crucial year 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, the company is putting in place essential building blocks for its next growth phase.

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

“These Tech Hubs and its other R&D centers will help Volvo Cars achieve its ambition to become a leader in future mobility by creating a global powerhouse of next-generation technology. The company will also continue its commercial transformation toward more direct business and a constantly improving customer experience,” says the press release.

Assuming no further unexpected supply chain disruptions exist, Volvo Cars expects solid double-digit growth in retail sales for the entire year. It also expects the share of fully electric car sales to be higher than last year’s full-year share of 11%.

“We’re staying on the course and continue to make progress toward our ambition to be a leader in next-generation mobility,” Jim Rowan concluded. “The proof of a fundamental transformation is in its execution, and that is where our focus continues as we head into the second half of 2023.