Volvo Cars blames EU tariffs as it cuts 2024 sales forecast

By Marie Mannes and Nick Carey

STOCKHOLM (Reuters) -Volvo Cars cut its full-year retail sales forecast on Thursday, blaming European tariffs on EVs made in China that will hit one of the Swedish automaker's key electric models until it shifts production to Belgium. 

While reporting better than expected second-quarter results that sent its shares up 6% in morning trade, Volvo lowered its forecast for sales growth this year to 12%-15% from 15%.

"It's really driven by tariffs," CEO Jim Rowan told Reuters. "It's a short term issue for us, but it is an issue and we're just going to have to deal with that."

Rowan said that while Volvo still hoped for 15% growth, it was now providing a range given the uncertainty.

"We wanted to put a floor on that for the markets to say we're still going to grow but there are some headwinds," he said.

Earlier this month, the EU announced provisional tariffs of up to 37.6% on imports of EVs made in China, saying they benefited from unfair subsidies - an allegation Beijing rejects.

Volvo is majority-owned by China's Geely and faces a 19.9% tariff on its Chinese-made fully-electric EX30.

Rowan said the Swedish automaker faced a "minimum of six months" of tariffs until it moves EX30 production to Belgium, which is expected to start early next year.

Volvo said the main ramp-up of EX30 production at its factory in Ghent was expected during the second half of 2025.

Bernstein analysts said in a note that the new sales guidance was "sensible given today’s macroeconomic situation."

Major automakers have seen slowing demand for EVs, driven in part by a lack of affordable models and the slow rollout of charging points.

Meanwhile, U.S. and European automakers have reported strong sales of hybrids, and are rolling out more such models to meet demand.

Volvo said it saw a "modest decline" in orders for fully electric models in the second quarter, but noted "demand for hybrid cars remains very strong".

"We will continue to invest in this line-up and these cars form a solid bridge for our customers not yet ready to move to full electrification," Rowan told analysts in a conference call.

Volvo produced 211,900 cars in the second quarter, more than it sold amid the decline in European demand for EVs. 

Its operating income, which includes its stake in loss-making Polestar, rose to 8 billion crowns ($758 million) from 5 billion crowns a year earlier. That topped the 6.7 billion crowns expected by analysts, LSEG data showed.

Operating income excluding joint ventures and associates rose to 8.2 billion crowns from 6.4 billion.

The company's battery electric vehicle (BEV) gross margins rose to 20% from 16% in the previous quarter, underpinning the CEO's assertion that margins would continue to rise.

Rowan said Volvo intended to stop disclosing its EV margins from next quarter as this was increasingly sensitive information.

($1 = 10.5490 Swedish crowns)

(Reporting by Marie Mannes and Nick Carey; Editing by Jason Neely and Mark Potter)