Sweden-based Volvo Cars reported on Wednesday that it exceeded third-quarter operating profit expectations but revised its full-year sales growth forecast downward amid a slowdown affecting higher-end vehicles.
The company indicated that demand for electric vehicles has diminished over the past year, attributed to a shortage of affordable models and the slow deployment of charging infrastructure. Additionally, competition from lower-priced Chinese models has intensified, and automakers are preparing for the impact of European tariffs on EVs manufactured in China.
Volvo Cars now anticipates its retail sales will increase by 7-8% this year, a reduction from its July forecast of 12-15% growth, with no expected growth in the fourth quarter. CEO Jim Rowan remarked, “There’s no doubt that the sector’s getting tougher… We’re starting to see a slowdown in consumer sentiment, driven partly by high inflation. A lot of people are taking car loans out in order to pay for their new vehicles, and high inflation obviously affects that.”
The company is relying on the upcoming EX30 and EX90 SUVs to drive sales and is under pressure to deliver the anticipated high margins. Although Volvo had previously believed that demand weakness was primarily impacting the mass market, the company acknowledged on Wednesday that the challenges have now extended to the premium market, where its vehicles are positioned.
In a shift similar to others in the industry, Volvo Cars announced in September that it would delay its electrification plans, opting to continue selling new hybrids for a longer period than initially intended. The company also scaled back its profit margin targets, now focusing on outpacing growth in the premium car market instead of providing specific sales goals.
Operating profit for the majority-owned Geely company reached 5.8 billion Swedish crowns ($550 million) in the third quarter, compared to 4.5 billion crowns in the same period last year, surpassing forecasts from analysts at JP Morgan and Bernstein. Bernstein noted, “Volvo Cars delivered a handsome Q3 beat on revenue and margin,” while also highlighting that the outlook downgrade indicates a challenging year ahead.
