Volvo posts record 6-month profit on US and China demand

Volvo Cars recorded its best ever half-year results at the end of 2020, shrugging off the coronavirus pandemic to book record profits after strong growth in China and the US.

Although full-year sales and profits dropped, the second-half performance was far better than the first.

For the second half of the year, the Geely-owned carmaker posted SKr9.5bn ($1.1bn) of operating profit and SKr151bn of sales, both records for any six-month period. Net income for the period was SKr9bn, 44 per cent higher than the same period in 2019.

The vehicle maker booked a 6.3 per cent profit margin for the second half, achieving a long-held aim of hitting comparable levels with its German rivals, Daimler and BMW.

Other carmakers including VW and Daimler have reported record earnings for the later period of the year, as sluggish trading in Europe was offset by strong Chinese demand.

“It was the best half year ever, we saw a very impressive comeback especially in China and the US,” Volvo Cars chief executive Hakan Samuelsson told the Financial Times.

In the US, the group was boosted by its new plug-in hybrid model and a smaller sport utility vehicle, the XC40.

In China, sales last year were above pre-pandemic levels, fuelled by the rise of the premium segment.

“It’s still growing very fast, and the premium segment is outperforming the market, it is growing even faster,” he said. “It’s not infrastructure driving the growth, its consumption, so we expect to see continued growth this year.”

Full-year sales were SKr263bn, down from SKr274bn a year earlier, and operating profit was SKr8.5bn, down from SKr14.3bn.

While the number of cars sold by the group during 2020 fell from 705,000 to 662,000, it expects to hit its previous 2020 target of 800,000 sales — scrapped because of the pandemic — this year. “Because of the pandemic we have an extra year, but we should come close to that goal,” Mr Samuelsson added.

In time, driven by its increasing range of electric cars, the company may catch up with its German rivals that sell more than 2m vehicles a year, he said, citing Tesla as an example.

“It’s very difficult to see, but it could even be more cars. I think electric will further increase the premium segment because they are the first ones to electrify, especially in the longer range and high performance areas,” he said.

“Tesla is coming into the premium segment, so it’s not just the three Germans any more”.