German Manager Magazine: Volvo: Car maker turns off Polestar’s money supply003070

The Swedish car maker Volvo is turning this around Electric car manufacturer Polestar shuts off the money. In the future, support for the company will come solely from Polestar co-owner Geely, Volvo Cars announced on Thursday. Polestar said Volvo Cars would remain a strategic partner in development, manufacturing or spare parts business, but was considering selling its stake in Polestar to its shareholders, particularly Geely Sweden. Polestar last presented a plan in November according to which the company wants to be in the black by 2025.

Things went better at Volvo last year than ever before. Sales improved by 17 percent to the equivalent of 35.5 billion euros, and operating profit before investments rose to 2.3 billion euros. However, including the Polestar stake, profits fell. Volvo boss Jim Rowan (59) said some important steps in the transformation had been achieved. The first vehicles of a new electric SUV were delivered at the end of 2023, and another electric car will follow in the first half of 2024.

Reduce the gap to the competition

Volvo also hopes that the new models will reduce the gap in the profit margin between electric cars and combustion engines in 2024. Volvo Cars is aiming for a profit margin of eight percent by 2026. Volvo then wants to achieve sales of 550 to 600 billion crowns (53 billion euros). This corresponds to an average annual sales growth of 11 to 15 percent. According to Lesne, the market is currently only expecting a margin of a good 6 percent this year with revenues of 520 billion crowns.

At the same time, the company reiterated its goal of becoming a purely electric car manufacturer by 2030. For the time being, however, hybrid models – which have a battery as well as an internal combustion engine – are likely to make up a large share of sales. The proportion of fully electric cars is expected to continue to increase noticeably, after rising from eleven to 16 percent in 2023. Rowan spoke of a strong improvement in profit margins for electric cars. The gross margin on vehicles quadrupled to 13 percent. Gross margin measures what remains of the selling price after manufacturing costs. Selling and administrative costs have not yet been deducted.

The stock jumped higher on Thursday after a weak run in recent months. The paper gained around 21 percent in Stockholm to 33.04 Swedish crowns (2.92 euros). The share price has had a difficult time in recent months and recently fell from more than 50 crowns in July to less than 30 crowns. At the beginning of 2022, the title was still worth over 90 crowns. Above all high prices for the battery raw material lithium

plagued the Swedes long after the price shock resulting from the war of aggression Russia in the Ukraine. Only over the past year has the situation gradually improved. UBS analyst David Lesne pointed to Volvo boss Rowan’s unexpectedly high ambitions for the medium term.

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