Volvo Cars CEO suggests the global chip shortage is easing

Volvo Cars, one among Europe’s prime automotive manufacturers, says it is previous the worst of a chip provide crunch that positioned an amazing squeeze on auto manufacturing.

The firm’s semiconductor stock is now “back at fully supply,” CEO Jim Rowan advised CNBC’s “Squawk Box Europe” on Wednesday.

“We had guided in the first quarter we were affected by one specific semiconductor which hampered production across most of our range,” Rowan added.

“We had forecasted by and large we would be through that by the end of the second quarter, and that’s what we’ve seen. We are through those semiconductor issues.”

The chip shortage took its toll on the auto business, which has turn into more and more reliant on semiconductors.

Mikael Sjoberg | Bloomberg | Getty Images

Semiconductors have been in brief provide for the higher a part of the previous two years as a consequence of a litany of points with global provide chains attributable to the Covid-19 pandemic.

This took a toll on the auto business, which has turn into more and more reliant on semiconductors to regulate all the things from the braking system to extra high-tech options like interactive shows.

Steady as she goes

Volvo Cars, which performs in the extra luxurious finish of the automotive sector, posted a blended set of second-quarter outcomes Wednesday. The agency noticed a 27% droop in retail gross sales, with 143,006 items bought in the three months by to June, and a 2% drop in revenues to 71.3 billion Swedish krona ($7 billion).

Operating EBIT, or earnings earlier than curiosity and taxes, got here in at 10.8 billion Swedish krona, greater than double the 4.8 billion it reported in the second quarter of 2021. Profits had been boosted by a derivative of the firm’s electrical car-focused subsidiary Polestar on the Nasdaq.

Volvo Cars mentioned its outcomes had been hampered by inflation in uncooked materials costs and provide chain restraints ensuing from Covid lockdowns in China. The agency is majority-owned by Chinese auto agency Geely and has a lot of its manufacturing primarily based in the nation.

Shares of Volvo Cars had been down 7% Wednesday.

Nevertheless, the automaker struck a vivid tone general, characterizing the outcomes as “steady” in the face of intense market turbulence.

Volvo Cars noticed a “marked improvement in the stabilisation of its supply chain with production making a strong comeback in June,” the firm mentioned in its earnings launch Wednesday.

“In the second quarter, we were hampered by the lockdowns in China,” Rowan mentioned.

“But with the China lockdowns now behind us, we’re now back with semiconductors back in full supply — for at least Volvo Cars, that is.”

No slowdown in demand

Rowan added the outlook on shopper demand was additionally bettering regardless of headwinds from inflation and fears of a recession.

“We don’t see any dampening of demand,” he mentioned. “Now we’ve seen raw material prices increase and, by and large, we’ve managed to increase prices on our products to offset those raw material price increases.”

“Even having done that, we don’t see any dampening in demand pretty much globally.”

Volvo Cars noticed enhanced demand for its Recharge line of plug-in hybrids and electrical autos, Rowan added. The agency is pushing to go full-electric by the finish of the decade.

Still, the firm mentioned in its earnings assertion that it expects retail gross sales to be flat or barely decrease in 2022 in comparison with final yr, “due to the time lag between production and retail deliveries.”

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