Volvo Cars Links COVID in China to Second-Quarter Sales Slide

While Volvo Cars reports a 27% second-quarter year-on-year decline in retail sales, it sees revenues slip just 2%.

Its latest financial report cites challenges with ongoing uncertainties in global trade, increasing raw material prices and supply chain constraints arising from recent pandemic lockdowns in China. Retail sales amounted to 143,006 cars while revenues amounted to SEK 71.3 billion ($6.95 billion), a comparatively small drop thanks to “strong pricing and product mix,” the automaker says.

Earnings before interest and taxes (EBIT) for Volvo’s core operation reached SEK 4.6 billion ($448 million), or a margin of 6.5%, while the reported EBIT including joint ventures and associates reached SEK 10.8 billion ($1.05 billion), or a reported margin of 15.1%.

The reported EBIT was positively impacted by the accounting effect of last month’s listing of Polestar at the Nasdaq stock exchange in New York. Volvo is the EV manufacturer’s largest shareholder.

Volvo puts much of the blame for the sales slump on COVID lockdowns in China, which not only impacted the company’s retail deliveries there but also severely curtailed production of Recharge cars in China and Europe. It expects this impact will continue to be seen into the third quarter. However, for full-year 2022 its target remains hitting a double-digit share of all-electric cars, or more than double compared with 2021.

Volvo says it also is seeing a marked improvement in the stabilization of its supply chain, with production making a strong comeback in June. Provided this continues, the company expects production to progressively increase in the coming months. As a result, it expects wholesale volumes for 2022 to be better than in 2021. However, owing to the time lag between production and retail deliveries, those improvements are not expected to result in an increase in retail sales during the calendar year. So, for full-year 2022 the company anticipates retail sales to be flat or slightly lower compared with volumes in 2021.

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Jim Rowan (pictured, left), president and chief executive of Volvo Cars, says: “When looking back at Volvo Cars’ performance during a very turbulent second quarter, we are satisfied that we have delivered steady earnings. The demand for our products continues to be robust, and we remain focused and clear that the short-term business challenges will not weaken our resolve to meet our mid- to long-term strategic ambitions. If anything, it will only speed up our pace of change.”