The pace of change at Volvo Cars will remain undiminished in coming years despite recent success in tripling its operating profit in 2015 to SEK6.6bn, according to Håkan Samuelsson, president and chief executive.
Mr Samuelsson said he was proud to have reported that Volvo’s operating profit margin increased from 1.6 per cent in 2014 to 4 per cent in 2015, but pointed out that this was around half the level being generated by its competitors in the premium segment.
“Volvo’s transformation is nowhere near complete. The company’s revitalisation has been effective so far, but work remains to be done and we are entirely focused on the future. The next stage in Volvo’s expansion will be even more exciting than the first.”
Volvo is implementing a sweeping USD11bn transformation plan that has involved the development of its own modular vehicle architecture, a new engine range, global manufacturing capability, a completely renewed product range and world leading developments in safety, autonomous driving and connectivity.
But Mr Samuelsson made clear that despite these recent changes, the company retains an ambitious medium term expansion plan that will lead to an increase in sales, improved profitability, enhanced productivity and a position as one of the world’s leading premium car brands.
The following areas, among others, will be in focus in coming years:
The next stage in Volvo’s transformation will be driven by a completely renewed product portfolio.
Larger 90 series and 60 series cars will be built on the Scalable Product Architecture (SPA) architecture. It will also implement a global small car strategy, introducing the quality and technical sophistication that is available on SPA to smaller cars on the Compact Modular Architecture (CMA).
“Our new expanded global range of smaller cars will improve and broaden Volvo’s presence in an important and growing market segment,” said Mr Samuelsson.
Volvo will continue to reposition its brand to compete with its global rivals, revive sales and operations in the US, continue to grow sales in China, double market share in Europe and overall reach sales of 800,000 cars globally.
“Both sales mix and profitability will improve as we roll out our new products,” said Mr Samuelsson.
Volvo’s plant in Torslanda, Sweden, will in future make its 90 series top of the range cars as well as next generation 60 series, while its plant in Ghent, Belgium, will become a purely CMA plant for new 40 series cars. A new plant in the US will become operational in 2018 and make 60 series SPA based cars. The plants in China will make cars for domestic use and for export.
“We are developing a global industrial footprint that will mean we will primarily build cars in the regions in which we sell them. This is not only more efficient, but also provides a natural currency hedge,” said Mr Samuelsson.
The company’s operating profit margin will double from today’s level and be brought in line with its competitors in the premium segment.
“This year will be another record year in terms of sales and profitability will also improve,” Mr Samuelsson said.
Volvo will also position itself as a leading global maker of electrified vehicles, a series of four and three cylinder plug-in twin engine cars, offering world beating combinations of power and low emissions. Every range of cars it sells will have this option. It will also develop a new all-electric car by 2019.
“At least 10 per cent of annual sales will be electrified vehicles in the medium term,” said Mr Samuelsson.
Volvo will start one of the world’s most advanced and ambitious autonomous driving vehicle test in Gothenburg, in 2017, with 100 real customers using AD cars in everyday life, paving the way for us to entrench its position as a global leader in AD technologies.
“We have stated that by 2020 no one should be seriously injured or killed in a new Volvo car. Autonomous driving is one key path to achieving this vision,” said Mr Samuelsson.
At the same time as revenues and profits are rising at Volvo, the company will retain a relentless focus on costs in order to ensure that it achieves its ambition of increasing its operating margin.
“We will grow, but we will not grow fat,” said Mr Samuelsson. “Improving productivity is always a priority. We have come a long way in the last five years, but we still have a long way to go.”
Volvo Car Group in 2015
For the 2015 financial year, Volvo Car Group recorded an operating profit of 6,620 MSEK (2,128 MSEK in 2014). Revenue over the period amounted to 164,043 MSEK (137,590 MSEK). For the full year 2015, global sales reached a record 503,127 cars, an increase of 8 per cent versus 2014. The record sales and operating profit cleared the way for Volvo Car Group to continue investing in its global transformation plan.
About Volvo Car Group
Volvo has been in operation since 1927. Today, Volvo Cars is one of the most well-known and respected car brands in the world with sales of 503,127 in 2015 in about 100 countries. Volvo Cars has been under the ownership of the Zhejiang Geely Holding (Geely Holding) of China since 2010. It formed part of the Swedish Volvo Group until 1999, when the company was bought by Ford Motor Company of the US. In 2010, Volvo Cars was acquired by Geely Holding.
As of December 2015, Volvo Cars had almost 29,000 employees worldwide. Volvo Cars head office, product development, marketing and administration functions are mainly located in Gothenburg, Sweden. Volvo Cars head office for China is located in Shanghai. The company’s main car production plants are located in Gothenburg (Sweden), Ghent (Belgium), Chengdu and Daqing (China), while engines are manufactured in Skövde (Sweden) and Zhangjiakou (China) and body components in Olofström (Sweden).