Volvo Cars Seeks Sales Growth as Chip Crunch Hits Output

(Bloomberg) -- Volvo Car AB said it’s confident it can improve sales and profitability this year even as the global shortage in semiconductors continues to weigh on auto production.

The manufacturer owned by China’s Zhejiang Geely Holding Group Co. lost output of 50,000 cars in the third quarter compared to the year-earlier period, it said Tuesday. It reiterated its full-year outlook despite preliminary unit sales declining to 52,000 vehicles in November.

“The supply situation has improved going into the fourth quarter, but we expect the industrywide shortage of semiconductors to remain a restraining factor,” Chief Executive Officer Hakan Samuelsson said. “The supply of cars is still lower than demand.”

Volvo Cars has gained by around a quarter since its trading debut in Stockholm a month ago as investors bought into the company’s turnaround and promise of an electric future. Still, like most manufacturers, it has seen output derailed by the chip crunch. The company temporarily halted production at its plant in Belgium last week and reported a 22% drop in vehicle sales in October because of the issues.

Volvo Cars isn’t planning further production stops for now but expects the supply snarls to continue during the first half of next year, Chief Financial Officer Bjorn Annwall said in an interview. 

The company’s shares declined 2.8% as of 9:43 a.m. in Stockholm amid a broader slump in auto stocks.

Electric Push

Under Geely’s ownership, Volvo managed a successful turnaround after long languishing under the roof of Ford Motor Co. The company has been particularly successful with its line-up of SUVs like the XC90 and smaller XC60 that combine clean Nordic styling with a reputation for reliability and safety.

Volvo Cars seeks to expand production capacities by building a third plant, most likely in Europe, to help meet a target of selling 1.2 million vehicles per year by 2025. It plans to sell only fully electric vehicles by the end of this decade -- up from 4% of shipments in the three months trough September.

Volvo Cars said sales fell 7% to 60.8 billion kronor ($6.7 billion) in the third quarter, in line with numbers disclosed in its IPO prospectus last month. Operating and net income also declined.

The company still expects “continued growth in sales volume and revenue” this year and -- assuming market conditions continue to normalize -- profitability to improve to pre-pandemic levels.

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