Volvo Cars, the Swedish automobile manufacturer, has announced a remarkable surge in operating profits for the third quarter of 2023. This impressive financial upturn, driven by escalating sales of battery-electric vehicles (BEVs), underscores the changing dynamics in the automotive industry. Notably, BEVs account for 13% of the company’s global sales volume.
Impressive Profit Growth
The company’s operating profit, excluding figures from joint ventures and associates, catapulted to SEK 6.1 billion (USD 548 million) during the third quarter of 2023. This achievement marks a substantial improvement from previous figures. In terms of EBIT (operating) margin, again excluding joint ventures and associates, the company reached 6.7%. This marks a significant increase compared to the margin of 4.4% recorded during the same period in the previous year.
This remarkable profit growth can be attributed to several key factors. The strong performance of the company’s vehicles in terms of sales and revenue growth played a pivotal role. Furthermore, lower costs related to raw materials and logistics have also contributed to the enhanced operating profit.
Strong Sales Performance
Volvo Cars experienced double-digit growth in retail sales throughout all three months of the third quarter. When examining the sales growth for the entire quarter, it reached an impressive 22% compared to the third quarter of 2022. As a result, the company has now celebrated 13 consecutive months of retail sales growth.
One of the standout aspects of the report is the robust performance of the company’s battery-electric vehicles (BEVs). The market share for BEVs in the third quarter stood at 13%, nearly double what it was during the same period in 2022, reflecting a remarkable 111% year-on-year growth. Customers have shown a strong interest in models like the entry-level EX30, which garnered higher-than-expected pre-orders.
Production and Revenue Growth
The third quarter of 2023 saw a notable 16% increase in vehicle production volumes compared to the same period in the previous year. This upswing can be attributed to the improving supply chain visibility and availability. The company reported revenues of SEK 92 billion (USD 8.3 billion) for the quarter, marking a 16% increase in revenue compared to the same period in the previous year.
Positive Impact of Lower Costs
An essential contributor to the improved gross margin was the increasing profitability of electric cars, which achieved a 9% margin, signifying a significant rise compared to the previous quarter. This indicates the positive impact of lower lithium prices and the enhanced pricing of model-year 2024 BEVs. Moreover, lower raw material prices and reduced costs for freight and logistics have played a significant role in these improvements. The spot buy costs for vital components like semiconductors have also experienced a decline.
Jim Rowan, the President and CEO of Volvo Cars, expressed his views on the company’s performance, stating, “Our operating performance is gathering momentum while we continue to make steady progress on our transformation objectives. As such, the quarter developed as we planned and communicated, putting us in a good position to close out the year with solid double-digit growth in retail volumes and a considerably higher share of fully electric cars for the full year.”