Volvo reports record first-half results, but warns chip crisis will hit hard

Volvo Cars said on Friday it had the best half-year sales and operating profit in the company’s 94-year history, but the automaker warned the ongoing shortage of microchips would negatively effect its results in the second half.

“The base scenario that we have is that the chip shortage will not improve, which means our sales and revenue growth in the second half will be flat compared with the second half of 2020,” Volvo CFO Bjorn Annwall told Automotive News Europe.

For the full year, however, Volvo expects to increase its vehicle sales and revenue, the automaker said.

Volvo had to temporarily halt production for periods of time throughout its network, which includes plants in Sweden, Belgium, the U.S. and China, during the half to cope with the shortage. Annwall, however, declined to say how many units Volvo lost during the period.

“We are focusing on trying to meet the consumer demand the best we can. So far, we have done a fairly good job,” he said.

Audi CEO Markus Duesmann recently told Automotive News Europe that the Volkswagen Group subsidiary was “a five-digit number of cars behind” in production due to the chip shortage.

Daimler said this week that early-year growth for its main Mercedes-Benz division will be wiped out by the shortage.

High-margin models

Volvo reported earnings before interest and tax (EBIT) of 13.24 billion crowns ($1.5 billion) versus a loss of 989 million a year earlier. That boosted its EBIT margin to 9.4 percent compared with a negative result in the first half of 2020.

Sale were up 26 percent to 141.1 billion crowns ($16.2 billion).

Volvo’s results in the first six months were lifted by a strong market recovery from the last year’s pandemic-stung figures as well as the automaker’s decision to prioritize sales of crossovers and electrified models, which yield higher margins.

“The global shortage led to positive effects on revenue and profitability,” the automaker said in its half-year financial report.

But Volvo CEO Hakan Samuelsson said the automaker will struggle to continue with that strategy because it will not have as much reserve stock to sell.

“In the first half we sold more than we produced because we could lower our inventory, but you can only do that once,” Samuelsson told ANE.

When asked whether the Volvo’s strong performance would be beneficial as the automaker gears up for a potential initial public offering later this year, Samuelsson said the figures were the result of its concerted effort to lower its CO2 impact by rapidly shifting to electrification.

“The number of people who want to invest in it and sustainability is growing all the time,” he said.

Volvo wants full-electric cars to account for half of its global sales by mid-decade and to be an all-electric brand by 2030.