Car maker Volvo is making low profits despite strong demand

GÖTEBORG (dpa-AFX) – Swedish carmaker Volvo Cars saw a drop in profits despite higher sales in the first quarter. The company removed nearly 182,700 vehicles, twelve percent more than a year earlier, as it announced on Wednesday in Gothenburg. However, sales and profits fell dramatically because revenue from contract manufacturing declined and losses from associated companies increased. The news was not well received in the stock market.

Shares in Volvo Cars lost nearly seven percent of their value in Stockholm this morning. However, the paper had gained nearly 45 percent by Tuesday evening since last year’s trading records were presented in early February.

In the first quarter, lower revenue from contract manufacturing, currency effects and a combination of changed structure had a negative impact. As a result, sales fell by two percent year-on-year to 93.9 billion Swedish crowns (8.1 billion euros). Analysts, however, expected an increase.

The surplus even fell by ten percent to 3.6 billion crowns because Volvo had to incur huge losses from joint ventures and investments. Excluding these items, operating earnings before interest and taxes (EBIT) grew by eight percent to 6.8 billion crowns.

CEO Jim Rowan expressed confidence for this year due to strong demand, even if the environment will continue to be difficult. After sales rose 15 percent to nearly 709,000 vehicles last year, they are now expected to increase at least through 2024. Rowan predicted profitable growth for the business this year.

The manager also confirmed his growth plans for 2026. Until then, the company still aims for sales between 550 and 600 billion crowns with its model range of pure electric cars and hybrid cars. If the results of joint ventures and investments are excluded, eight percent of this will remain as operating profit./stw/nas/jha/