Volvo Cars reports all-time record profitability and revenues despite seeing its vehicle output crash by 20% in the fourth quarter of 2021.
The Swedish automaker’s full-year report says demand for its cars remained strong against rival companies, with growing unit sales despite persistent component supply shortages in the auto industry.
The company’s revenue for 2021 amounted to SEK282 billion ($30.2 billion), up from SEK262.8 billion ($27.9 billion) in 2020. It reported operating income of SEK20.3 billion ($2.18 billion) for the year, up from SEK8.5 billion ($913 million) in COVID-19-disrupted 2020. The operating margin for the period was 7.2%.
It is clear the strong performance of the brand’s premium luxury electric-powered vehicles over its less-expensive internal-combustion products deserves most of the credit for Volvo’s increased profitability.
The company reports that while fourth-quarter 2021 revenue shows a 6% drop compared to the same period last year, the negative effect of volumes was offset by strong price realization and a shift toward high-margin models.
That said, technology investment did eat into profits, such as those required by Volvo’s sub-brand Polestar where costs were incurred in their early development phase and a change in accounting treatment related to deferred tax assets. Operating income was SEK3.7 billion ($397 million) in the quarter, representing an operating margin of 4.6%. Excluding share of income from joint ventures and associates, EBIT margin was 7.1%.
The company says that while sales volumes fell in Q4 year-on-year, its electrified lineup continued to be popular with customers and Recharge models made up 34% of global volume in the fourth quarter. Plug-in hybrids amounted to 28% of volumes, while fully electric cars comprised 6% of total sales in the fourth quarter.
Volvo expects its share of fully electric vehicles to double for full-year 2022 and plans to increase annual production capacity of these to 150,000 cars after the summer. Looking ahead, it adds, uncertainty is still high; while the component shortage has eased somewhat, the supply chain is expected to remain a restraining factor.
CEO Håkan Samuelsson says: “2021 was a year to be proud of for Volvo Cars. Despite persistent component supply shortages in the auto industry, we increased market share globally and delivered all-time high revenue and profitability.”
