Q: What’s your outlook for the remainder of 2021 and 2022?
A: That may be a troublesome query due to the semiconductor scarcity. We had good momentum, then coronavirus outbreaks within the Far East closed down a few of our element suppliers, together with these offering semiconductors. Because of this, we misplaced manufacturing of about 50,000 automobiles.
We offset this by actually decreasing our inventory ranges; due to this fact, the precise registrations loss was about 30,000 in contrast with final 12 months. However now the vendor inventory may be very low as a result of they’ve bought out all the things they’ve. The fourth quarter positively seems like it is going to be higher, so the loss in manufacturing will likely be decrease, however any losses will lead to misplaced retail gross sales.
Total, issues will likely be higher within the ultimate quarter of 2021, however they nonetheless won’t be again to regular. By the primary quarter of subsequent 12 months, we needs to be again on observe with solely minor disruption from the chip scarcity. It is too early to say what that can imply for the full-year leads to 2022.
Will you continue to be capable of set a worldwide gross sales report in 2021 by topping the 705,452 automobiles Volvo bought in 2019?
It is inside attain, however it will depend on how the manufacturing issues within the Far East develop. We’re shut, so perhaps we are going to have a good time a brand new all-time excessive. It is not unimaginable.
What concerning the goal of 800,000 gross sales? Will this aim get pushed to 2022 or 2023?
Completely. We thought we have been roughly on our solution to get there as a result of after the primary half of this 12 months, once we added up the earlier 12 months of precise figures (June 2020 till June 2021), we have been at about 775,000.
At that time you might virtually spherical as much as 800,000. However since then, now we have dropped again as a result of we misplaced a lot manufacturing within the third quarter.
What are the indications that present the chip disaster is coming to an finish?
We see it within the confirmed deliveries from suppliers. After having massive cuts within the third quarter, higher volumes of elements are coming in. Because of this, we should shut our factories and halt manufacturing much less usually within the fourth quarter.
How a lot is the pandemic nonetheless impacting enterprise?
In the case of the day-to-day foundation, right here in Sweden, we’re again to regular. You do not see anyone carrying masks, not even if you’re touring throughout the nation on an airplane. Most individuals are again of their places of work.
The massive drawback now we have in the case of conducting enterprise is touring to the U.S. and China. China continues to be very remoted. We’ve not been there in virtually two years.
We’re planning to go to the U.S. within the coming months. Whereas now we have gotten significantly better at distant conferences, generally you actually need to meet individuals face-to-face.
What impact is it having on how Volvo retails automobiles?
We’re shifting to on-line gross sales, direct gross sales and electrification, and you’ll’t get individuals to make the transition by merely writing an e-mail and asking them to get issues applied by Monday.
That is slowing us down as we attempt to get all people to grasp the targets and execute the modifications. How a lot of an influence this has is unknown. However we in all probability can be additional alongside if we did not have the restrictions.
I’ve been actually pissed off that we can’t communicate with our retailers face-to-face in lots of locations due to the restrictions.
Volvo needs half of all world gross sales to be performed on-line by 2025. The place do issues stand now?
We’re at 5 to 10 p.c within the markets the place we provide this. Germany is near 10 p.c and the U.S. is at about 5 p.c. We additionally supply on-line gross sales in Holland, Sweden and Norway. On high of that, all of our full-electric vehicles will solely be bought on-line. Proper now, they account for 3 to 4 p.c of our gross sales. (Volvo’s aim is for 50 p.c of all world gross sales to be full electrical by 2025.) We may have an enormous step improve in EV capability subsequent 12 months when now we have a full 12 months of gross sales of the C40.
One among your long-term targets at Volvo was to have an working margin of 8 to 10 p.c. Within the first half, helped by higher pricing, the margin was 9.4 p.c. How sustainable is that degree of profitability?
In the case of this 12 months, we will likely be again to pre-coronavirus ranges, which is a margin of about 5 to six p.c, like we had in 2019 (when the full-year margin was 5.2 p.c). From there, we are going to transfer ahead. By mid-decade it needs to be at 8 to 10 p.c, so we must be round 3 proportion factors higher.
How will you try this, particularly when the shift to full-electric automobiles will initially add value?
We have to offset that value by growing vehicles extra affordably, which incorporates utilizing frequent architectures throughout the Geely Group and in addition by simplifying the automotive. It will occur as a result of with EVs, we are going to not want issues akin to gas tanks and engines.
The aim is that by mid-decade, the fee to supply an electrical automotive will match the price of making a light hybrid right now.
However that doesn’t give us any profitability enchancment. That’s the reason it is essential to discover a extra environment friendly solution to distribute and promote vehicles. That is an space the place we will actually be higher. It will embrace clear, constant pricing so we keep away from inner competitors and discounting. We additionally desire a less complicated product providing, which can enable us to higher handle our inventory and cut back capital prices. All of that ought to enhance profitability.
Does itemizing the corporate in public buying and selling assist increase your profitability?
Very not directly. When you must clarify your technique to buyers you get sharper. These sensible questions that got here up through the itemizing course of have been very useful. Additionally, being compelled to report the place you’re on a quarterly foundation is a bit disagreeable when you might have unhealthy outcomes, however it is a chance to clarify what you’ll do to be higher sooner or later. The scrutiny is sweet.
As well as, the itemizing makes the corporate a bit extra engaging as we attempt to construct up our experience in, as an illustration, the software program space. Folks usually like working for a listed firm the place they’ve the likelihood to buy shares and be enrolled in a stock-based bonus program.
Volvo has aggressively moved into plug-in hybrids, however now the transition to full electrification has accelerated, particularly in Europe. If you happen to may do it over once more, would you place extra emphasis on battery-electric automobiles and fewer on plug-in hybrids?
Provided that we’d have recognized 5 years in the past that the charging community can be adequate as of right now. That has not occurred. Subsequently, plug-in hybrids have been a needed intermediate step.
I believe long run there will likely be only a few plug-in hybrids, however that can solely occur when now we have a big sufficient charging infrastructure.
On the plus facet, about 40 p.c of our gross sales in Europe are plug-in hybrids. That is a step towards electrification. All of these clients are nearer to transferring right into a full-electric automotive than if that they had bought one other diesel. Subsequently, we made the best determination.