Volvo Cars reports better-than-expected Q2 earnings but lowers its full-year sales forecast due to the impact of European tariffs on Chinese-made electric vehicles.
Bollywood Fever: Volvo Cars reported higher-than-expected second-quarter operating earnings on Thursday but lowered its full-year retail sales forecast, citing the impact of European tariffs on Chinese-made electric vehicles (EVs) which could affect one of its key electric models.
Automakers and suppliers have long bet on rising demand for EVs, but the current slowdown in sales means that investments in capacity and technology are outpacing demand. While Volvo Cars has reported positive EV sales recently, the company revised its forecast for sales growth this year to 12%-15%, down from the previous 15%.
“We wanted to put a floor on that for the markets to say we’re still going to grow but there are some headwinds,” Volvo Cars CEO Jim Rowan told Reuters, attributing the adjustment primarily to tariffs.
In the second quarter, Volvo Cars produced 211,900 cars, exceeding the number sold, as demand for electric cars in Europe declined. The European Union recently announced tariffs of up to 37.6% on imports of EVs made in China, a move expected to further reduce demand. Brussels has until autumn to make a final decision on the tariffs, which are currently preliminary.
Despite these challenges, Volvo Cars’ operating income, which includes its stake in the loss-making Polestar, rose to 8 billion crowns ($758 million) from 5 billion crowns a year earlier, surpassing the 6.7 billion crowns expected by analysts, according to LSEG data. Excluding joint ventures and associates, operating income increased to 8.2 billion crowns from 6.4 billion.
Notably, the company’s battery electric vehicle (BEV) gross margins improved to 20% from 16% in the previous quarter, supporting CEO Rowan’s assertion that margins would continue to rise.
Key Takeaways:
- Q2 Earnings: Volvo Cars reported operating income of 8 billion crowns, exceeding analyst expectations.
- Sales Forecast: The company lowered its full-year sales growth forecast to 12%-15% from 15%, citing European tariffs on Chinese-made EVs.
- Production vs. Demand: Volvo produced more cars than sold in Q2, reflecting decreased demand for EVs in Europe.
- Tariff Impact: The EU’s preliminary tariffs of up to 37.6% on Chinese-made EVs are expected to dent demand further.
- BEV Margins: Battery electric vehicle gross margins rose to 20% from 16% in the previous quarter.
Volvo Cars continues to navigate a challenging market environment, balancing positive earnings performance with the headwinds posed by international trade policies and fluctuating EV demand.
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