Volvo Cars reported its best-ever second-half profit and sales volumes in 2020, illustrating the company’s success in mitigating and recovering from the impact of the coronavirus pandemic earlier in the year.
The company reported revenue of 151 billion SEK (R267 billion) and an operating profit of 9.5 billion SEK (R16.8 billion) for the second six months of 2020. Profits increased by 8.2 percent during the period, while revenues were up by 4.9 percent. The profit margin came in at a strong 6.3 percent.
The result reflects the company’s best-ever second half in terms of sales, driven by strong demand for Volvo Cars’ Recharge line-up of chargeable cars. Volvo Cars sold 391,751 cars in the second six months of 2020, an increase of 7.4 percent compared to the same period in 2019, taking market share in most markets.
For the full year 2020, Volvo Cars reported revenue of 263 billion SEK (R465 billion) and an operating profit of 8.5 billion SEK (R15 billion). It managed to reduce fixed costs in combination with growth, which had a positive influence on cash flow and liquidity.
“We acted decisively to limit the impact of the pandemic,” said Håkan Samuelsson, chief executive. “After a safe restart of our operations, we recovered strongly and reported the best second half in the company’s history. It is also promising to see the fast-growing demand for our Recharge line-up of chargeable cars, which we expect to continue in 2021.”
The share of Recharge cars as a percentage of total sales more than doubled in 2020, compared to 2019. In Europe, sales of plug-in hybrids represented 30 percent of total volumes, making Volvo the leading plug-in premium brand measured as a share of its total sales volume. In the US, Volvo is also a leading plug-in hybrid brand in the market.
In China and the United States, its two largest individual markets, the company reported growing sales for the full year as it managed to recover a pandemic-related sales drop in the first half during the second half of the year. In Europe it reported a small second-half decline due to a sluggish overall market.
South African sales were strong too. According to Greg Maruszewski, managing director of Volvo Car South Africa, the company’s served segment share last year was an all-time record – at 9.6%. Putting this into perspective, it was a mere 2.9 percent as recently as 2015. The company’s December 2020 segment share results rose to 11.5 percent.
During 2020, Volvo Cars also saw an accelerated move towards online sales as a result of the pandemic, a development that the company expects to continue in 2021. In 2020, Volvo Cars more than doubled its number of subscriptions sold online versus 2019. Conquest rates via this channel continued to be high, supporting the increases in market share.
For 2021, the company anticipates continued growth in sales volume and revenue, as we benefit from a strong product offering and further increases in online sales. Assuming market conditions continue to normalise, this growth, as well as continued cost management are anticipated to improve profitability to pre-corona levels.
With ongoing investments in new technologies and new products, the company foresees a similar level of capital expenditure as in 2020. Cash flow is expected to remain strong. It also expects a continued reduction in its overall CO2 emissions per car, in line with the company’s ambition to reduce these by 40 percent by 2025.
Maruszewski says that 2020 was undoubtedly a landmark year for Volvo. “On a global front, we introduced our first all-electric car, the XC40 Recharge Pure Electric, which we will welcome to South Africa soon. Our plug-in hybrid line-up range also enjoyed growth. We’re facing 2021 with optimism and we look forward to continuing to meet our customers’ ever-evolving needs,” he concludes.