Volvo Cars has reported an impressive operating profit (EBIT), excluding joint ventures and associates, of SEK (Swedish Krona) 8.2 billion for the second quarter of 2024. This figure represents the highest quarterly profit in the company’s history and marks a 28% increase compared to the same period in 2023.
Core EBIT Margin and Profitability
The core EBIT margin reached a record high of 8.1%, up from 6.3% last year. This improvement in profitability can be attributed to Volvo’s focus on pricing discipline, internal cost control, and sustained growth in sales.
Sales Growth and Electrification
Global retail sales for the quarter rose by 15% year-on-year to 205,400 cars, driven largely by the company’s electrified vehicle offerings. Sales of plug-in hybrids and electric cars increased by 43% compared to the same period last year. Notably, 48% of Volvo Cars’ global sales volume during the quarter consisted of plug-in hybrid (PHEV) and fully electric (EV) cars, with EVs alone accounting for 26% of sales.
The EX30 small SUV emerged as one of the top three best-selling EVs in Europe, while the XC60 plug-in hybrid maintained its status as the best-selling PHEV in Europe in recent months. This strong demand for electrified cars is reflected in Volvo Cars’ gross margins, which rose to 22.8% from 19.0% last year. Gross margins for EVs reached a new high of 20%.
Revenue and Operational Strategy
Revenue for the second quarter was SEK 101.5 billion, slightly down from SEK 102.2 billion in the same period last year. The revenue decline was due to reduced income from contract manufacturing and a normalisation of sales to rental companies. Core revenues from operations, excluding contract manufacturing income, remained stable.
Jim Rowan, Chief Executive of Volvo Cars, commented on the strong performance: “We delivered a strong second quarter performance in 2024 with record underlying profitability, demonstrating our ability to create value despite a complex geopolitical and economic environment.”
Product Portfolio and Market Performance
2024 is a significant year for Volvo Cars, with the rollout of the EM90 MPV and the ramp-up of the EX30. The first customers will take delivery of the flagship fully electric SUV, the EX90, in the third quarter of 2024. Production of the EX90 has started in South Carolina, US.
Volvo’s balanced portfolio, which includes fully electric, plug-in, and mild hybrid models, is a strategic bridge to an all-electric future. This approach addresses market conditions where not all consumers can transition to fully electric vehicles due to infrastructure or incentive challenges.
Future Outlook and Geopolitical Challenges
Volvo Cars continues to invest in new models and improvements to existing ones. The upcoming Capital Markets Day in September will provide more details on the company’s technological roadmap and future models.
The company acknowledges the complex geopolitical environment and potential challenges, such as tariffs from the EU commission affecting EVs from China. However, Volvo plans to start producing the EX30 in Ghent, Belgium, in 2025, aligning with its ‘Build where we sell’ strategy.
Despite these challenges, Volvo Cars expects retail sales to grow by 12-15% in 2024, barring any major disruptions. The company remains confident in its operational fundamentals and expects to deliver strong cash flows from 2026 onwards as investment scales decline and it benefits from its long-term strategy.
In summary, Volvo Cars is positioned for continued growth and profitability, supported by its strong operational fundamentals, balanced product portfolio, and strategic investments in electrification.
