Volvo Cars Reports Full-Year 2022 Results – Accelerating Strategic Journey and Navigating Challenges

The company made significant progress during the year on its strategic ambitions, as it accelerated towards becoming a fully electric car company by the end of the decade and climate neutral by 2040.

• FY22 revenue is up 17 per cent to 330.1 bn SEK (282 bn SEK in FY21)
• FY22 operating income (EBIT) was 22.3 bn SEK (20.3 bn SEK in FY21)
• FY22 EBIT margin was 6.8 per cent (7.2 per cent in FY21)
• FY22 EBIT margin excl. share of income from JVs and associates was 5.4 per cent (7.5 per cent in FY21)
• FY22 Basic earnings per share were 5.23 SEK (4.72 SEK in FY21)
• FY22 Fully electric car sales accounted for 11 per cent of total sales (4 per cent in FY21)
• Q4 revenue was 105.2 bn SEK (80.1 bn SEK in Q4 2021)
• Q4 operating income was 3.4 bn SEK (3.7 bn SEK in Q4 2021)
• Q4 EBIT margin was 3.3 per cent (4.6 per cent in Q4 2021)
• Q4 EBIT margin excl. income from JVs and associates was 3.7 per cent (7.1 per cent in Q4 2021)
• Q4 Basic earnings per share were 0.82 SEK (0.66 SEK in Q4 2021)
• Q4 fully electric car sales share at 18 per cent (6 per cent in Q4 2021)

Volvo Cars today reports an operating profit, including joint ventures and associates, of 22.3 billion SEK and a profit margin of 6.8 per cent for the full year 2022, as it faced prolonged supply constraints, lockdowns in China and high material and logistics costs during the year. The interim report for the entire year and fourth quarter can be found here.

“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.

By the mid-decade, Volvo Cars aims to reach a 50 per cent global sales share of fully electric Volvo cars, with a 40 per cent lower carbon footprint per car and profitability of 8-10 per cent. “We remain steadfast on that strategic journey,” added Jim Rowan.

Sales Performance

In 2022, the performance of the company’s fully electric cars stood out as a real highlight. Sales of Volvo’s electric vehicles more than doubled compared to the previous year, resulting in 11 per cent of full-year sales attributed to fully electric cars, compared to 4 per cent in 2021.

This includes a strong performance in sales of pure electric cars in the fourth quarter, reaching the highest point ever at 18 per cent, compared to 6 per cent 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 compared to last year*.

The company’s Recharge cars’ performance, which includes fully electric vehicles and plug-in hybrids, was strong, with a share of 33 per cent for the year and 41 per cent during the fourth quarter. Of note were Brazil, Uruguay, Thailand and Indonesia’s performance during the last three months.

These markets reached a Recharge sales share of 100 per cent in Q4, closely followed by Norway at 98 per cent, Ireland at 91 per cent and Sweden at 89 per cent.

In 2022, Volvo Cars’ revenues reached 330.1 bn SEK, up 17 per cent compared to the previous year. This is the highest-ever revenue recorded in the company’s history, attributable to a better product mix, higher price realisation on the cars, foreign exchange tailwinds and contract manufacturing with Polestar.

Operating Performance

In 2022, EBIT excluding JVs and associates reached 17.9 bn SEK, down 15.7 per cent compared to 2021. The EBIT margin for the entire year stood at 5.4 per cent. Despite a favourable product mix and firm 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 semiconductors.

For 2023, the company anticipates that raw material prices, especially lithium, will remain at elevated levels and spot-buying of semiconductors will continue.

EBIT, including JVs and associates, came in at 22.3 bn SEK for the year, up 10 per cent compared to 2021. This translated into an EBIT margin of 6.8 per cent 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 year’s second half, particularly during the fourth quarter. For the last six months of the year, production increased by 15 per cent 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 by 49 per cent compared with last year. For the full year of 2022, the number of Volvo Cars sold online increased by 17 per cent 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 a CO2 reduction per car by 15 per cent, compared with our 2018 benchmark, supporting the company’s mid-decade ambition of reducing CO2 per car by 40 per cent.

2023

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 recent independent reports. Despite the global turbulence, uncertainty and recent price increases, Volvo Cars continues to see healthy demand for its cars. As ever, the company continues to monitor the external environment and adapt accordingly closely.

To help offset increased costs, the company has recently reinforced a total cost and efficiency optimisation plan across the organisation. This aims to deliver 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; therefore, creating a more cost-aware culture is a crucial building block for the future.

So, suppose 2022 marked the company’s strategic acceleration in the face of unprecedented global disruption. In that case, 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 the UK from a traditional wholesale business to a 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 11 per cent.

“We have demonstrated in 2022 that we have turned up our execution engine. This will continue to deliver in 2023,” said Jim Rowan.

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