Volvo Cars have reported an operating profit, including joint ventures and associates, of 22.3 billion SEK and a profit margin of 6.8% for the full year 2022, as it faced prolonged supply constraints, lockdowns in China and elevated material and logistics costs during the year.
“We managed through the heavy turbulence of the year and made significant progress on our strategic ambitions in 2022, as we accelerated towards our aim to become a fully electric car company by the end of the decade and climate neutral by 2040,” said Jim Rowan, president and chief executive.
Already by mid-decade, Volvo Cars aims to reach a 50% global sales share of fully electric Volvo cars, with a 40% lower carbon footprint per car and profitability of 8-10%. “We remain steadfast on that strategic journey,” added Jim Rowan.
In 2022, the performance of the company’s fully electric cars stood out as a real highlight. Sales of Volvo’s electric cars more than doubled compared to the previous year, resulting in 11% of full-year sales attributed to fully electric cars, compared to 4% in 2021.
This includes a strong performance in sales of pure electric cars in the fourth quarter, reaching the highest point ever at 18%, compared to 6% in the same period last year. This was despite overall sales being affected by production constraints. As a result of this performance, the company’s market share in the fully electric segment increased significantly during the year, compared to the same period last year.
The performance of the company’s Recharge cars, which includes both fully electric cars and plug-in hybrids, was strong with a share of 33% for the year and 41% during the fourth quarter. Of note was the performance in Brazil, Uruguay, Thailand and Indonesia during the last three months. These markets reached a Recharge sales share of 100% in Q4, closely followed by Norway at 98%, Ireland at 91% and Sweden with 89%.
In 2022, Volvo Cars’ revenues reached 330.1 bn SEK, up 17% compared to the previous year. This is the highest ever revenue recorded in the history of the company, attributable to a better product mix, higher price realisation on the cars, foreign exchange tailwinds and contract manufacturing with Polestar.
In 2022, EBIT excluding JVs and associates reached 17.9 bn SEK, down 15.7% compared to 2021. The EBIT margin for the full year stood at 5.4%. Despite a favourable product mix and strong pricing, the EBIT performance was affected by lower volumes on the back of production constraints, increased raw material and freight costs and spot-buying of semi-conductors. For the duration of 2023, the company anticipates that raw material prices, especially lithium, will remain at elevated levels and spot-buying of semi-conductors will continue.
EBIT including JVs and associates came in at 22.3 bn SEK for the year, up 10% compared to 2021. This translated into an EBIT margin of 6.8% for the year. The higher EBIT for 2022 was mainly due to the accounting effect of Volvo Cars’ shareholding in Polestar following their listing on the Nasdaq Stock Exchange in New York last year.
SUPPLY CHAIN AND CO2 REDUCTION
Manufacturing output improved in the second half of the year, particularly during the fourth quarter. For the last six months of the year, production increased by 15% compared to the first half of the year on the back of an improved supply situation.
The number of active subscriptions at the end of 2022 increased 49% compared with last year. For the full year of 2022, the number of Volvo Cars sold online increased 17% compared with 2021. This growth was driven by increasing customer demand in combination with a broadened offer in more markets.
The strong sales momentum of the Recharge line-up of fully electric and plug-in hybrid cars during the year contributed to CO2 reduction per car by 15%, compared with our 2018 benchmark, supporting the company’s mid-decade ambition of reducing CO2 per car by 40%.
While 2023 looks to be another challenging year, the company is hopeful that the COVID-related supply shortages from China are behind it and that it continues to see steady improvement in the supply of semiconductors. In addition, Volvo Cars is optimistic that the price of lithium will start to decline towards the end of the year, in line with many of the independent reports recently published.
Despite the global turbulence, uncertainty and the recent price increases, Volvo Cars continues to see healthy demand for its cars. As ever, the company continues to closely monitor the external environment and adapt accordingly.
To help offset increased costs, the company has recently reinforced a comprehensive cost and efficiency optimisation plan across the organisation. This is aimed at delivering on Volvo Cars’ strategic ambitions with better utilisation and optimisation of resources. It is clear now that uncertainty and volatility are the inescapable business realities of today and therefore creating a more cost aware culture is a key building block for the future.
So, if 2022 marked the acceleration of the company’s strategic journey in the face of unprecedented global disruption, 2023 will be a pivotal year as the company further accelerates on that transformation path.
Volvo Cars will launch a new small fully electric SUV during the year, which will take the company to a new demographic, and start production of the Volvo EX90. This year, the company will also transform UK from a traditional wholesale business to become direct consumer facing with a seamless consumer experience and national pricing. NOVO Energy, the joint venture company with Northvolt, will take a crucial step towards developing sustainable battery technology with the start of construction of one of Europe’s largest battery cell plants in Gothenburg.
Volvo Cars expects a solid double-digit growth in retail sales during this year, provided there are no unexpected supply chain disruptions. The company intends to continue increasing its volumes for fully electric cars in 2023, taking the full year share higher than last year’s share of 11%.
“We have demonstrated in 2022 that we have turned up our execution engine. This will continue to deliver in 2023,” said Jim Rowan.