Volvo ups profit goal as Europe sales outweigh China

Volvo Car Group boosted its earnings goal for the year, saying the robust European market would outweigh a slowdown in China, where pressure to discount is increasing.

“The price situation in China is getting tougher,” chief executive Hakan Samuelsson said yesterday.

“The important thing is to see the strength of having Volvo global. We can balance out softer development in China.”

Volvo said it now expects a “substantial” increase in 2015 profit.

The Swedish manufacturer, bought by Geely Holding Group in 2010, is beginning to reap the benefits of a five-year, €9.9bn spending plan to develop new models, Mr Samuelsson said.

But Volvo remains far less profitable than peers. Its profit margin on sales of 232,284 cars was 2.2% in the first half of this year, while luxury-car market leader BMW posted an 8.9% margin on 1.1bn deliveries.

Operating profit jumped 71% to 1.66bn kronor (€175.4m) in the first half, the company said.

Revenue rose 12% to 75.2bn kronor, helped by a 1.4% gain in deliveries despite flat sales in China.

The car firm moved to take control of its three joint ventures in China, paying 2.2bn kronor to lift its stakes in the entities to 50%.

The Chinese joint ventures with Geely include car factories in Chengdu and Daqing, engine manufacturing in Zhangjiakou and a Shanghai research and development centre.

The company still sees total sales close to 500,000 vehicles this year and about 800,000 in the medium term.