Colin-on-Cars – Volvo expects profitability rebound

Despite sales and operating losses brought on by the Covid-19 pandemic, Volvo Cars has rebounded and is expecting a business recovery in the second half of the year comparable to the same period for 2019.

The company recorded an operating result of R-1,82-billion over the first six months of 2020, as revenue fell by 14,1% to R206,5-billion.

XC60 Recharge Plug-In Hybrid R-Design, in Crystal White Pearl

While sales fell in absolute numbers during the first half, Volvo Cars took market share in China, the US and Europe, where Germany was among the strongest performing markets. It also saw a strong increase, of 79,8%, in demand for its chargeable plug-in hybrid models sold under the Volvo Recharge brand, while it experienced a strong growth in consumer interest in its online sales channels as well.

The company returned to sales growth in China in the second quarter and made up much of the ground lost in the first quarter, as it recorded an overall sales drop of only 3,0% in the first half.

The US also returned to growth in June, although sales fell by 13,7% year-on-year in the first half, while sales in Europe were 29.5% lower during the six-month period.

The overall passenger car market in China declined by 26,0% in first half, while the US and Europe fell by 24,0% and 38.1% respectively during the same period.

Håkan Samuelsson

“The downturn we saw in the first half is a temporary one,” says Håkan Samuelsson, chief executive. “We expect to see a strong recovery in the second half of the year and our Recharge range of electrified cars puts us in a strong position to meet the emerging trends we are seeing.”

Volvo Cars’ global sales during the first six months of 2020 fell by 20,8% to 269 962 cars, as governments in many key markets implemented stay-at-home orders or other restrictions on movement, severely affecting economic activity and showroom traffic.

Volvo Cars temporarily closed its manufacturing facilities and implemented work time reduction with the support of government programmes. It then quickly made a soft restart, with various precautionary measures in place, in order to safely welcome back employees to work. All in all, the Torslanda plant in Sweden lost only 15 days of production during the period.

“This pandemic has strengthened our confidence that our strategic ambitions are the right ones and that an accelerated transformation of our business will lead to long-term growth,” say Samuelsson. “We will continue to focus on and invest in electrification, online sales and connectivity.”

Asked by Colin-on-Cars how Volvo sees the long-term future where medical opinion warns this virus could re-occur or be replaced by a new one, he said the lessons learned now would shape how business is done going forward.

“I think much will remain with us in terms of social distancing, wearing of masks, and generally taking more care about the way in which we interact with each other. However, things will ease up and we do need to travel as face-to-face meetings are important.

“It really means we cannot become complacent.”

Volvo Cars and Plugsurfing offer Europe-wide charging service on all electric models

Volvo Cars is the only car maker to offer a plug-in hybrid variant on every model in its portfolio. Later this year, it will start production of the XC40 P8 Recharge, the company’s first fully electric model and the first of several fully electric models to be launched in coming years.

“If the market recovers as we expect, we anticipate sales volumes to return to the levels we saw in the second half of 2019 and it is our ambition return to similar profit levels and cash flow.”

Leave a Reply