By Marie Mannes

Stockholm (Reuters)

Sweden-based Volvo (OTC:VLVLY) Cars exceeded third-quarter operating profit expectations but lowered its full-year sales growth forecast due to a slowdown affecting the higher-end market.

Key Factors

• Demand for electric vehicles has declined over the past year, impacted by a lack of affordable options and slow charging infrastructure rollout.
• Increased competition from lower-priced Chinese models and impending European tariffs on EVs produced in China are further pressuring the market.

Revised Sales Forecast

Volvo Cars now anticipates a retail sales increase of 7-8% for the year, down from a prior 12-15% estimate made in July, with expectations of no growth in Q4.

CEO Insights

CEO Jim Rowan remarked, “There’s no doubt that the sector’s getting tougher… We’re starting to see a slowdown in consumer sentiment, driven partly by high inflation.” He noted that many customers are taking out car loans, which are impacted by inflation.

New Models and Business Strategy

Volvo is relying on new models, the EX30 and EX90 SUVs, to become significant contributors to sales, while investors are cautious about achieving projected high margins. The company had previously believed that demand weakness was limited to the mass market but acknowledged that it has reached the premium segment as well.

Electrification and Profit Expectations

In September, Volvo revised its electrification goals, deciding to sell hybrids longer than planned. The profit margin goal was also scaled down. Volvo now aims to grow faster than the premium market without specifying a concrete sales target.

Financial Performance

Operating profit rose to 5.8 billion Swedish crowns ($550 million) in Q3, compared to 4.5 billion crowns the previous year, exceeding forecasts from JP Morgan and Bernstein. Bernstein commented that Volvo Cars had a strong Q3 regarding revenue and margins but confirmed a challenging outlook ahead.

($1 = 10.5397 Swedish crowns)