Volvo Blames Weakening Consumer Demand in Key Markets for Q3 Profit Slump

Volvo Cars blames “volatile” trading conditions for a slump in its operating profits, excluding joint ventures and associates, for the third quarter of 2024, losing SEK 400 million ($37.9 million) compared to the same period last year.

The company reports a core operating profit (EBIT) of SEK 5.7 billion ($541 million) for the third quarter of 2024, versus SEK 6.1 billion ($578.5 million) for the same period in 2023.

It says its gross margins came in broadly in line with its underlying gross operational margins for the first of the year at 20.5%.

Meanwhile, revenues for the period amounted to SEK 93 billion ($8.8 billion) and the core EBIT margin landed at 6.2%.

However, it recognizes its ambitions will “not be straightforward since the weakness in the market has recently accelerated” as echoed in revised industry forecasts for 2024 and 2025 by third-party analysts. Overall consumer demand continues to soften and is now affecting the premium segment.

Volvo Cars says it is on track to outperform the premium car market by 2026 and has grown faster than its premium peers this year. The company’s third-quarter sales rose 3% to 172,849 cars sold, with electrified models, including battery-electric and plug-in hybrid cars, representing 48% of the total.

It claims the highest share of electrified vehicles in Europe's premium car sector. For the first nine months, the company claims sales increased by 10% year-on-year. This gives the company a foundation to outsell the premium car market in 2024, which is expected to grow by less than 1% this year.

In Europe, Volvo Cars increased its market share to 2.4% during the quarter, from 1.7% in the same period last year, in an increasingly competitive market while retaining its premium pricing position.

Although the market is softening, the company says it is encouraged by the strong performance of its balanced electrified model range, with the entry-level EX30 remaining as the third best-selling BEV in Europe and the XC60 continuing to be one of the most popular PHEVs in the region.

Yet, the car market in the company’s main regions of Europe, China and the U.S. is increasingly under pressure which affects demand. Given this accelerating weakness, the company expects minimal volume growth during the fourth quarter. As a result, it now anticipates full-year sales growth of 7% to 8%, instead of its earlier forecast of 12% to 15%.

Jim Rowan, chief executive for Volvo Cars, says: “Our journey towards 2026 will not be linear, as our industry is facing an increasingly volatile environment. Macroeconomic headwinds are intensifying, as is geopolitical complexity. Despite these challenges we demonstrated resilience during the third quarter of 2024, which is reflected in our overall financial performance.”

Looking to the future, Rowan says the company has five BEV models currently on the road and five more in development. As previously communicated, it plans to start building the EX30 in its Ghent, Belgium, plant during the first half of 2025, with volumes ramping up in the second half especially targeting an entry into the U.S. market.

The company also continues to invest in its hybrid cars, seen by the updated version of the iconic XC90 plug-in hybrid SUV. By refreshing these and other hybrid models, Volvo says it maintains a balanced product portfolio for the current marketplace.

Rowan concludes: “There's no doubt that the sector's getting tougher. We're starting to see a slowdown in consumer sentiment, driven partly by the high inflation. A lot of people are taking car loans out in order to pay for their new vehicles and high inflation affects that.

"We cannot control the current geopolitical uncertainties and economic headwinds. But we can navigate them with speed, purpose, and a clear focus. Our focus is more than ever on preserving cash while creating value – for our shareholders, customers and employees.”