Volvo Car walks back retail sales target on weaker demand

STOCKHOLM: Volvo Car AB lowered its expectations for retail sales this year due to a growing weakness in the automotive market.

The manufacturer will focus on protecting margins instead of pushing volumes and therefore sees unit sales growing at as much as 8% in 2024, from an earlier forecast of as much as 15%, it said on Wednesday.

"We’re seeing a softening in the market,” chief executive officer Jim Rowan said in an interview with Bloomberg Television, citing hurdles including high inflation rates and a slow build-out of electric-vehicle chargers.

The Swedish brand, owned by China’s Geely carmaking group, was one of the first automakers to pursue battery technology, with fully electric cars and plug-in hybrids now accounting for roughly half of its sales.

Volvo produces its vehicles in China as well as the US and Europe.

Last month, Volvo scaled back its profit outlook over an uncertain global economy and increased tariffs on EVs built in China.

Volkswagen, Stellantis, Aston Martin, Mercedes-Benz and BMW have all lowered their earnings expectations in recent weeks.

Volvo’s shares declined as much as 4.8% in Stockholm. The stock is down more than a fifth this year.

In September, the manufacturer also joined a growing roster of manufacturers walking back EV ambitions, abandoning a target to sell only fully electric cars by the end of the decade.

The maker of the electric EX90 and EX30 sport utility vehicles said it might need to keep some hybrid models in its portfolio amid the slowing market for battery cars.

The manufacturer’s third-quarter revenue and operating profit beat expectations on lower raw material costs and resilient demand for its models with a battery.

Retail sales rose 3% in the period, to 172,849 cars, with fully electric and plug-in hybrid vehicles accounting for 48% of the total.

The company’s "handsome beat” on third-quarter revenue and profitability could only partially mask the challenges to come, said Bernstein analysts led by Harry Martin.

"This is not out of whack with the profit warnings elsewhere in the sector, but confirmation the next 12 months will be incredibly challenging as the impacts of the EU-China tariff and rising competition from lower priced EV models come in,” Martin said.

The EU’s plan to raise duties on Chinese EVs is a "short-term problem,” Rowan told Bloomberg TV, adding that Volvo plans to start production of the EX30 - which currently is assembled in China - in Belgium next year.

"That helps us navigate some of the tariffs that we’ll see come in,” he said.

Volvo also said it was disciplined on pricing in China, resulting in reduced sales volumes in the world’s biggest auto market.

"The company’s internal cost efficiency initiative has already resulted in lower variable costs and remains a crucial focus area, and actions in this area will be accelerated,” the automaker said.