Volvo Cars braces for tough year after quarterly profit falls

VOLVO Cars on Thursday (Feb 9) said that 2023 was likely to be another challenging year despite healthy demand for its vehicles, as it reported a fall in quarterly profit.

The Swedish carmaker, which is majority-owned by Chinese automotive company Geely, said its fourth-quarter operating profit dropped to 3.4 billion kronor (S$431.5 million) from 3.7 billion kronor a year earlier.

“While 2023 looks to be another challenging year, we are hopeful that the Covid-related supply shortages from China are behind us, and that we continue to see steady improvement in the supply of semiconductors,” it said.

“Despite the global turbulence, uncertainty and our recent price increases, we continue to see healthy demand for cars.” It added that it expected a “solid” double-digit growth in retail sales during 2023.

Volvo Cars and its peers have faced lingering chip shortages over the past year that have periodically hit manufacturing; the Sweden-based company has been forced, at times, to temporarily halt production at some of its factories.

Other supply-chain issues, the energy crisis in Europe and red-hot inflation have also troubled the company.

However, it reaffirmed its mid-decade targets, which include selling 1.2 million cars per year by 2025. Before Volvo Cars reported its results, some analysts said the target was too ambitious and would be more realistic a few years later.

“We remain doubtful whether the company will be able to achieve these targets before 2027, and think the company will have to significantly stretch its definition of ‘mid-decade’,” investment manager Bernstein said.

Toyota Motor, which also posted its results on Thursday, cut its annual manufacturing target once more, after a reduction last November. The move came despite its vehicle sales rising.

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