Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Volvo Car AB (VLVOF, Financial) increased its retail deliveries by 3% in the third quarter, outpacing its premium peers and gaining market share in Europe.
- The company's gross margins improved to 20.5% from 19.6% the previous year, driven by lower material costs and enhanced operational efficiency.
- Volvo Car AB (VLVOF) continues to lead in electrification, with almost half of its total sales in the quarter coming from electrified cars.
- The EX30 is among the top three selling EVs in Europe, and the XC60 remains the best-selling plug-in hybrid in the region.
- Volvo Car AB (VLVOF) is making significant progress with its new EX90 model, which features advanced technology and is expected to redefine the premium electric SUV market.
Negative Points
- The company is experiencing a general weakening in demand for premium cars, particularly in key regions such as China and the USA.
- Volvo Car AB (VLVOF) revised its full-year sales growth expectations to 7%-8%, down from the previously guided 12%-15%, due to market turbulence.
- The company anticipates its full-year free cash flow to be in the single-digit negative billions of SEK for 2024, instead of neutral as previously guided.
- There is a slowdown in demand for EVs, attributed to factors such as slower development of charging infrastructure and reduced government incentives.
- Volvo Car AB (VLVOF) faces challenges from macroeconomic factors like higher interest rates and changing consumer sentiment, impacting demand.
Q & A Highlights
Q: Can you clarify the impact of one-off effects on the underlying EBIT margin for the third quarter?
A: Johan Ekdahl, CFO, explained that the underlying EBIT margin, excluding one-off effects, would be around 6% instead of the reported 6.2%. The one-off effects included positive impacts from depreciation and amortization adjustments and costs related to changes in the commercial approach.
Q: What are the reasons behind the slowdown in premium car demand, and how is Volvo addressing this?
A: Jim Rowan, CEO, noted that the slowdown is due to factors like high interest rates, inflation, and reduced EV subsidies. Volvo is focusing on maintaining price discipline and protecting value rather than pushing volume in a turbulent market.
Q: How is Volvo managing the transition of EX30 production to the Gent facility in Belgium?
A: Jim Rowan stated that the transition is on track, with localization and supply base development going well. The production in Belgium will help mitigate the impact of tariffs and shipping costs, aiming for near price parity with production in China.
Q: What is Volvo's strategy regarding CO2 credits, and do you expect any significant benefits?
A: Johan Ekdahl mentioned that Volvo is in a good position with its EV penetration, which could lead to a substantial upside from CO2 credits. However, they do not rely on this for financial targets and expect more material benefits in 2025.
Q: How is Volvo planning to navigate the challenges in the EV market, particularly with the EX90 and other new models?
A: Jim Rowan highlighted that the EX90, with its advanced technology, targets the premium segment. Volvo is focusing on a balanced lineup of hybrids and fully electric cars to adapt to varying regional demands and maintain competitiveness.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
