Volvo Cars Reports Increased Adjusted Operating Earnings in Q1 2024 Amid Easing Costs

Volvo Cars, the Swedish automotive manufacturer owned by Chinese company Geely, reported an 8% increase in adjusted operating earnings (EBIT) to SEK 6.8 billion in the first quarter of 2024 compared to the same period last year.

The company attributed the improvement to easing costs, including lower raw materials and logistics expenses, as well as strong sales performance.

Volvo's EBIT margin rose to 7.2% in Q1 2024 from 6.6% a year earlier, despite a slight decrease in revenue to SEK 93.9 billion due to lower contract manufacturing revenue. Retail sales grew by an impressive 12% year-on-year to 182,687 cars, setting new sales records in 11 markets.

The company made significant progress in its electrification efforts, with fully electric vehicles (EVs) accounting for 21% of total sales, up from 18% in Q1 2023. Volvo also saw improved gross margins on its EVs, reaching 16% in the first quarter, which CEO Jim Rowan described as "among the best in the industry."

Why this matters: Volvo Cars' strong financial performance and increasing EV sales share demonstrate the company's successful transition towards electrification and its ability to navigate challenges in the automotive industry, such as rising costs and supply chain disruptions.

Looking ahead, Volvo expects demand for its cars to remain robust and forecasts full-year sales growth of at least 15% in 2024. The company secured shareholder approval to reduce its stake in electric vehicle maker Polestar from 48% to 18%, allowing it to focus on its core business and investment plans.

Volvo Cars CEO Jim Rowan expressed confidence in the company's future, stating, "We remain focused on cost management and capital allocation to ensure healthy cash and liquidity. We expect free cash flow to be neutral in 2024 and 2025 before generating strong cash flows from 2026 onwards as the scale of investments declines and profitability increases." The company is well-positioned to achieve its ambitions of revenues between SEK 550-600 billion and an EBIT margin above 8% by 2026.

Key Takeaways

• Volvo Cars reported 8% increase in Q1 2024 adjusted EBIT to SEK 6.8 billion.
• Volvo's EBIT margin rose to 7.2% in Q1 2024 from 6.6% a year earlier.
• Fully electric vehicles accounted for 21% of Volvo's total sales, up from 18% in Q1 2023.
• Volvo expects full-year sales growth of at least 15% in 2024 and aims for EBIT margin above 8% by 2026.
• Volvo secured shareholder approval to reduce its stake in Polestar from 48% to 18%.