Volvo Car cuts profit targets on car market uncertainty and trade wars

By David Sachs

Volvo Car has lowered its profit expectations, citing a complex market environment and uncertainty related to trade wars around the world.

The Geely-owned Swedish carmaker on Thursday revised its financial targets through 2026 after abandoning a plan to sell only electric cars by the end of the decade amid a tumultuous transition to cleaner vehicles that has battered the global auto industry.

In addition, trade tariffs imposed on China by the US and the EU – as well as potential reprisals – have cast a shadow over the future of carmakers.

Volvo said it now expects its earnings before interest and tax margin to be 7-8% in 2026, down from its previous target of more than 8%.

The company also softened its revenue target, opting to measure success by whether it outperforms the premium car market by 2026 — something it said it has achieved in recent years. The carmaker had previously targeted revenue of 550 billion to 600 billion Swedish kronor ($53.43 billion to $58.28 billion).

Also on Thursday, ahead of a meeting with investors and analysts, Volvo announced an expanded partnership with Nvidia and added that new electric cars would be built on a single, flexible software-based platform to reduce costs.

The Geely-owned Swedish automaker said on Thursday the EX90 is the first to use a new centralized, digital production system that includes technology from the U.S. artificial intelligence company. Volvo said the software-centric architecture will combine with a new physical, electric production platform to reduce costs.

“Like a building set, it can be configured in many different ways,” the company explains.

Automakers are increasingly developing digital platforms – integrated systems of software, hardware and digital communications networks that control everything from the engine to the assisted infotainment system – as the industry moves into a digital and electric future.

Nvidia will play a bigger role in the company’s cars in the coming years, Volvo said. By 2030, the automaker will introduce cars with more powerful AI from the tech giant, which can perform many more operations per second. Volvo will also use Nvidia to develop autonomous driving technology.

Write to David Sachs at [email protected]

(END) Dow Jones Newswires

September 5, 2024, 02:45 ET (06:45 GMT)