Volvo Cars Reports 8% Rise in Q1 2024 Earnings Despite EV Sales Slowdown

Volvo Cars, the Geely-controlled automaker, reported an 8% year-on-year increase in its first-quarter 2024 core operating profit to 6.8 billion Swedish kronor (SEK), despite a slight dip in revenue to SEK 93.9 billion from SEK 95.7 billion in the same period last year. The company attributed the improved performance to lower material costs and higher sales volumes, even as it faced a slowdown in electric vehicle (EV) sales growth.

Volvo's retail sales rose 12% to 182,687 cars, with new sales records set in 11 markets. Plug-in hybrid and electric vehicle sales accounted for 41% of the global volume, with the EV share rising to 21% from 18% a year earlier. The company's EBIT margin improved to 7.2% from 6.6% a year earlier, though earnings per share fell to SEK 1.12 from SEK 1.21.

Why this matters: Volvo's Q1 2024 results demonstrate the company's resilience in the face of challenges in the EV market and its ability to maintain profitability through cost-cutting measures and increased production efficiency. The improved performance lays a solid foundation for Volvo's future growth and its commitment to electrification.

CEO Jim Rowan expressed confidence in the company's performance, stating, "The first-quarter results laid a solid foundation for the year ahead. We expect demand for our cars to remain robust and free cash flow to improve in the coming quarters, enabling us to be cash neutral for the full year."

Volvo's newly launched EX30 model, the smallest fully electric premium SUV, has already received over 20 awards and contributed to the improved gross margins on fully electric cars, which reached 16% in Q1 2024 compared to 7% in Q1 2023. The company also secured shareholder support to distribute its 62.7% ownership in Polestar, allowing it to focus on its core operations and investment plans.

Looking ahead, Volvo expects 2024 to be another solid year, with higher year-over-year retail sales growth and a further increase in the share of fully electric cars. The company aims to achieve revenues of 550-600 billion SEK and an EBIT margin above 8% by 2026. Volvo remains focused on cost control and robust capital allocation to ensure healthy cash flow, expecting free cash flow to be neutral in 2024-2025 before improving from 2026 onwards.

Key Takeaways

• Volvo's Q1 2024 core operating profit rose 8% to 6.8B SEK despite revenue dip.
• Volvo's retail sales grew 12% to 182,687 cars, with 41% being plug-in hybrid/EVs.
• Volvo's EBIT margin improved to 7.2% from 6.6% a year earlier, though EPS fell.
• Volvo expects robust demand and improved free cash flow in 2024-2025, aiming for 8%+ EBIT by 2026.
• Volvo's new EX30 EV model contributed to improved gross margins on fully electric cars.