Volvo Revises Margin and Revenue Goals

By Marie Mannes and Nick Carey
(Reuters) – Swedish automaker Volvo (OTC:VLVLY) Cars slashed its margin and revenue ambitions for a second time in a year on Thursday, a day after it abandoned its EV-only target by 2030, citing the impact of tariffs and a decrease in demand for electric vehicles.

Slowing demand for EVs, partly due to a lack of affordable models, as well as the effects of EU, U.S. and Canadian tariffs on electric cars made in China, have made market conditions increasingly difficult for automakers.

Volvo Cars, which is majority-owned by China’s Geely, lowered its operating profit margin target excluding joint ventures and associates to 7-8% from above 8%.

It also scrapped a sales goal of 550 billion-600 billion Swedish crowns ($53.5 billion-58.4 billion), now stating it expects to outgrow the premium car market.

This is the second time in a year that Volvo has walked back margin and revenue goals, after stepping away in January from a target for annual EBIT of between 8-10% and sales of 1.2 million cars annually by mid-decade first announced in 2021.

While the EV maker had prided itself on its unwavering confidence in aiming for full EV sales by 2030, it now plans for 90% of sales by then to be a mix of plug-in hybrids and EVs.

“We have seen that this transition is going to take a little bit longer than we had first thought when we first made those targets,” CEO Jim Rowan told Reuters.

As I have said before – business is not a game of perfection, it’s about continuous progress and adaptation,” he stated on Thursday.

Rowan mentioned that the removal of certain subsidies was contributing to the EV slowdown.

Christina Bu, head of Norway’s EV association, expressed that she was not surprised by Volvo’s decision to lower its near-term electrification goals, stating, “They are following after quite a few other automakers who have gone out with similar statements earlier.”

She emphasized that strong and long-term political support for the EV transition is necessary: “Strong policies are still necessary to be able to get this transition to work.”

In releases ahead of a planned investor event in Gothenburg, Volvo stated that starting with its flagship electric EX90 model, which will begin delivering to customers this month, it will introduce a single “technology stack” for all car models.

Volvo Cars also announced that it will utilize a single software system backed by Nvidia (NASDAQ:NVDA) chips for all future models, aiming to lower production costs with new processes like “megacastings” for vehicle underbodies.

The company reported a 3% year-on-year increase in car sales in August.

($1 = 10.2815 Swedish crowns)