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Home»Automotive»Volvo says margin gap between ICE and BEV cars is closing
Automotive

Volvo says margin gap between ICE and BEV cars is closing

adminBy adminFebruary 1, 2024No Comments6 Mins Read
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Volvo Says Margin Gap Between Ice And Bev Cars Is
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Volvo Cars reports that its gross profit margins on its electric cars increased fourfold in the course of the second half of 2023, contributing to a record trading 12 months for the corporate.

The development, to 13%, was versus the top of 2022 when high lithium prices heavily hampered EV profitability, but the corporate saw a transparent uptick within the underlying profitability of those cars from the second half of 2023 as lower lithium prices and the results of increased pricing materialised.

Volvo said while there continues to be a niche in gross margins on the EVs in comparison with a few of its combustion engine (ICE) cars, this gap is closing.

The EX30, Volvo’s recent entry-level electric automobile, is about to deliver gross margins of 15-20% and takes the corporate closer to that goal. Volvo Cars also expects the upcoming EX90, which fits into production in Q2, and EM90, each large electric cars, to contribute to closing the gap between EV and ICE margins.

A brand new all-time sales record of 708,716 cars enabled revenues to rise by 21 per cent to SEK 399.3 billion for the complete 12 months 2023. The underlying operating profit of SEK 25.6 billion, excluding joint ventures and associates, represents a rise of 43 per cent in comparison with 2022. The operating margin excluding JVs and associates got here in at 6.4 per cent, up from 5.4 per cent in 2022.

The EV share of Volvo’s automobile sales rose from 11% to 16%. Chief executive Jim Rowan (pictured) said the ramp up is exciting for the corporate and its dealers for 2024’s opportunities. “We expect to grow considerably within the EV segment this 12 months and to realize further market share,” he added. Although the mainstream EV market is perhaps under some pressure, the premium EV market continues to be a powerful opportunity, he said.

Nevertheless, the opposite cars in Volvo’s line up play a significant part in its growth, he said, providing mild hybrid and plug-in hybrid cars for purchasers to maneuver through on their path to BEV, as Volvo continues to aim for full EV sales by 2030. “The information we now have shows that is a natural progression for many shoppers,” he said.

“2023 was a key milestone in our transformation journey,” said Rowan, chief executive. “We delivered a record-breaking 12 months on many levels, reporting the very best retail sales, revenues and profits in our company’s 97-year history. We also took several significant steps forward in our ongoing transformation, while navigating a posh external environment. In doing so, we’ve built a solid foundation for 2024 and the years ahead.”

UK deliveries of the EX30 are about to start, followed by the EX90, which had been placed on pause while some software issues were ironed out – Rowan said this model has possibly essentially the most complex software of any automobile, actually of any Volvo, and it was essential to make sure it is true before it goes out to customers, regardless that Volvo could use over-the-air updates.

Asked about Volvo’s progress to online, direct-to-consumer recent automobile sales, chief business officer and deputy CEO Björn Annwall said the important thing objective for the carmaker is that the client experience is delivered in a more efficient way, reducing the associated fee for Volvo and its retail partners. It means marrying the physical and digital systems seamlessly, and Volvo is learning from its pilot market, the UK, that the patron experience will be good “so long as it’s a quite normalised journey”.

Annwall added: “What we still have to work on is to remove a few of the back end work. We’d like to get some systems optimised to get the complete efficiency advantages. After which there are also consumers behaving in many alternative ways, so whenever you get outlier cases, those cases we’re not ok at handling yet.

“We’re working to resolve that in a great way, and as we now have these learnings we proceed to implement this in other markets.”

Rowan said a positive sign from the UK transition is the profitability of VCUK last 12 months.

Sweden and Norway shall be the subsequent to change to agency contracts and D2C sales, but Annwall said one other learning is that every little thing is not going to switch over on day one, but it should be done over a period with its retailers. Volvo is already reshaping its retailer networks in Europe to make sure they’re efficient and well positioned for the longer term.

“This shouldn’t be a revolution, that is an evolution we do along with our retail partners,” said Annwall.

A give attention to Volvo, not Polestar

Volvo Automobile is ceasing its funding for Polestar, the electrical automobile brand which originated throughout the Swedish brand, to make sure Volvo’s focus is on developing and concentrating its resources by itself ambitious journey.

Rowan said Polestar is expanding to a four-car brand and it’s a natural expectation that it becomes an independent company with its own funding. Volvo shouldn’t be a natural fit as a holding company, he said.

While Polestar’s first two cars were built on Volvo platforms, it’s now also accessing platforms from its parent, China’s Geely, and Geely will proceed to offer full operational and financial support to Polestar going forward, including potentially becoming a big shareholder should Volvo look to downsize its own stake.

Nevertheless a partnership between Volvo and Polestar will proceed, he said, doing joint R&D and a few business and aftersales operations together.

 

Volvo Automobile Full Yr 2023 

2023 revenue was SEK 399.3 bn (SEK 330.1 bn in 2022)

2023 operating income (excl. JVs and associates) was SEK 25.6 bn (SEK 17.9 bn in 2022)

2023 operating income was SEK 19.9 bn (SEK 22.3 bn in 2022)

2023 EBIT margin (excl. JVs and associates) was 6.4 per cent (5.4 per cent in 2022)

2023 EBIT margin was 5.0 per cent (6.8 per cent in 2022)

2023 basic earnings per share was SEK 4.38 (SEK 5.23 in 2022)

2023 fully electric automobile sales share at 16 per cent (11 per cent in 2022)

 

This Article First Appeared At www.am-online.com

BEV cars closing Gap ICE margin Volvo
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