Volvo's financial report has no new surprises

Author | Wang Xiaojun

Editor | Chai Xuchen

In today's automotive market, domestic brands are rising rapidly, while established players are fading into obscurity.

Recently, Volvo Group released its financial report for the fourth quarter of 2024 and the entire year of 2024, showing a significant decline in several key operating indicators compared to the same period last year. Moreover, market attention towards Volvo's financial report has been relatively sparse.

The financial report indicates that for the entire year of 2024, Volvo Group's net sales amounted to 526.8 billion Swedish Krona (compared to 552.3 billion in the same period last year), with an adjusted operating profit of 65.7 billion Swedish Krona (compared to 78.2 billion last year), and an adjusted operating profit margin of 12.5% (compared to 14.0% last year). The capital return rate for the group's industrial operations was 35.8% (compared to 36.7% last year).

In fact, this performance was already anticipated. Last year, Volvo, which had always appeared in the public eye with an aggressive electrification image, began to compromise and slow down its transformation pace.

Although Volvo was one of the first automakers to actively pursue electrification, its progress has not been smooth due to the lack of representative models in the electrification sector, especially in the fiercely competitive Chinese market.

According to Volvo's plans, it aims for pure electric models to account for 50% of its sales by 2025, with the remainder being hybrid models; by 2030, it will only sell luxury pure electric models; and by 2040, it aims to achieve carbon neutrality, with all pure electric models sold exclusively online.

Furthermore, the slowdown in Volvo's electrification has triggered a series of chain reactions. In the personnel changes in October, then Chief Business Officer and Deputy CEO Bjorn Annwall left the company, and the position of Deputy CEO will no longer be established.

It is worth mentioning that Bjorn Annwall, like former Chief Operating Officer and Deputy CEO Javier Várela, who left in May last year, was appointed as Deputy CEO of Volvo in 2022, serving alongside the newly appointed Volvo CEO, Luo Wenjin, to achieve Volvo's electrification goals.

While adjusting its electrification strategy, Volvo has also lowered its revenue growth expectations for 2024. At that time, Volvo decided to focus on protecting profit margins rather than expanding sales.

From the market situation, Volvo's sales, especially in the new energy vehicle sector, have seen growth in the European market, while major concerns are concentrated in the Chinese market.

In 2024, Volvo's total sales are expected to be approximately 763,400 units, a year-on-year increase of 8%. However, its sales in the Chinese market were 156,400 units, down 8% from 2023, reaching the lowest point in recent years.

The decline is not difficult to understand. Since 2017, Volvo has announced its electrification strategy. At that time, its transformation was relatively early compared to traditional Chinese automakers. However, after several years, the models launched in the market have struggled to shake off the public perception of "fuel to electric." At the end of 2023, it launched a significant new pure electric model, the EM90, but due to its classification as an MPV and high pricing, it has struggled to achieve actual sales In the Chinese market, the promotional logic of various brands indicates that in the era of electrification, consumers' purchasing logic differs from that of the fuel vehicle era.

In the fuel vehicle era, brand was the primary factor for consumers when purchasing cars, even accounting for a very high proportion; however, in the new energy era, consumers focus more on configurations, technology, and other factors, leading to a decrease in the brand's significance, or consumers are more inclined to recognize pure new energy brands. This is naturally not favorable news for traditional luxury brands with high premiums.

However, the good news is that Volvo's pure electric/hybrid models continue to see good growth in the European market. This also means that Volvo will need to make differentiated adjustments based on the performance of different markets, just as it adjusts its electrification strategy at this time.

Additionally, in 2025, Volvo plans to launch seven highly competitive models, including three pure electric products: EX90, ES90, and EX30 Cross Country. The Volvo EX90 is built on a native pure electric platform and adopts a centralized electronic and electrical architecture, while the Volvo ES90 will make its global debut in March 2025.

The addition of new models is expected to change Volvo's current situation.

Although it has actively slowed down electrification, from the investment perspective, Volvo is still quietly making efforts.

In 2024, Volvo's R&D expenses increased by 17%, driven by increased investment in electrification. Currently, a comprehensive R&D framework integrating electric motors, batteries, and electronic controls has been formed in the Asia-Pacific region. Among them, the Volvo Asia-Pacific electric motor laboratory and battery laboratory are the first electric motor and battery laboratories outside of Volvo's headquarters in Gothenburg, Sweden.

For global automakers, the current competitive landscape has also become more complex. On one hand, the fuel vehicle market is shrinking, but the transition has not been recognized, and progress in electrification and intelligence is relatively lagging; on the other hand, Chinese new energy vehicle companies are accelerating their overseas expansion, seizing market share, especially in the European market.

Volvo needs to further accelerate R&D or seek partners in the new competitive landscape, as the current theme in the Chinese automotive market is intelligence. For instance, in recent days, many automakers have integrated the recently popular DeepSeek model to continuously upgrade their intelligence. However, there is still relatively little new information regarding Volvo's advancements in intelligence.

When the competition intensifies, Volvo needs to adopt more flexible strategies and a more resolute attitude to respond to the changing market dynamics