VLVOF - Volvo Car AB (publ) (VLVOF) Q4 2023 Earnings Call Transcript

2024-02-01 16:35:26 ET

Volvo Car AB (publ) (VLVOF)

Q4 2023 Results Conference Call

February 01, 2024 02:00 AM ET

Company Participants

Ron Banerjee - Head of Corporate Communications

Jim Rowan - President and Chief Executive

Johan Ekdahl - Chief Financial Officer

Bjorn Annwall - Chief Commercial Officer and Deputy CEO

Conference Call Participants

Hampus Engellau - Handelsbanken

James Attwood - Autocar

Daniel Roeska - Bernstein

George Galliers - Goldman Sachs

Agnieszka Vilela - Nordea Markets

Chris Bryant - Bloomberg

Pushkar Tendolkar - HSBC

Dorothee Cresswell - BNP Paribas

John McIlroy - Auto Express

Stephanie Vincent - Bank of America

Presentation

Ron Banerjee

Good morning, and welcome to Volvo Car's Earnings Call coming to you from Stockholm. My name is Ron, and I'm joined this morning by our President and Chief Executive, Jim Rowan; our Chief Financial Officer, Johan Ekdahl; and our Chief Commercial Officer and Deputy CEO, Bjorn Annwall. At the top, Jim, Bjorn, and Johan will walk us through our performance, and thereafter, we'll throw it open for a question and answer on it. Before I invite Jim to come up here, take a look at this short video that summarizes the year 2023. Jim will join on the other side.

Jim Rowan

Hello, and welcome to Volvo Car's Fourth Quarter Full Year Financial Results for 2023. As you can see, it was a record year. We delivered some key milestones to our transformation journey in Volvo Cars during the last 12 months with record breaking years on many levels. We reported the highest retail sales, revenues and profits in the 97 year history of our company. 2023 was a strong operational performance year for us. As we said, record year in terms of sales, revenue, EBIT, but also in fully electric BEV share. 16 months of consecutive growth in retail sales with a balanced portfolio of BEV, PHEV, and MHEV products. Fully electric car sales increased by 70% with increased margins, increased production output by 18%, reflecting our strong supply chain resilience. We delivered meaningful fixed cost efficiencies. We entered the premium EV sector in China with the launch of a new MHEV. We commercially launched the multiple award winning EX30, with strong preorders, and the delivery of those cars to customers happened in the fourth quarter. We substantially strengthened our next generation technology, including further investments in AI. And in so doing, we laid solid foundations for our continued growth in 2024. We are the only heritage car company that split our BEV margins. We saw that rise to 13% on our CMA XC40, C40 platform, and that will increase further as we develop the EX30 into more and more geographies and sell more of those cars around the world.

We are the highest premium BEV share company, and we have the highest published BEV margins in the EV sector other than Tesla. We're proud of all of those achievements. But perhaps we're most proud of the three new cars in our full production lineup this year, all with a very specific focus. The EM90 is tailed at the premium sector of the MPVs in China. The EX90, our global seven seater, fully electric car with strong customer demand, targeted towards Europe, our North American and our Chinese markets. The EX30, our new small SUV targeted very specifically towards bringing in new customers and city drivers. This combination of those three strong cars in addition to our existing lineup, we think, positions us well for continued growth in 2024. But let's look at each of those cars individually, the EX30. We already have 40,000 cars have left the factory. The car has been released for sale. We have strong demand. We have strong supply. Five colors, four interiors, two drivetrains, two battery types, including LFP, 450 kilometer range, and the lowest CO2 footprint of any car we've ever produced. It also goes from zero to a 100 kilometers an hour in 3.6 seconds. A safe, sustainable, a city car that will attract new customers to Volvo. The EM90, a premium car specifically targeted towards the China MPV market. This will help strengthen our brand, attract new customers and improve our gross margins and our profitability in China. Production on that car has already started. The EX90, our flagship SUV, seven seater, fully electric, almost 600 kilometers of range based on our new SPA2 core compute architecture with new active safety systems, including LiDAR as standard.

This positions Volvo technology ahead of many of our premium competitors globally. It's our safest and most intelligent Volvo that we have ever produced, and that car will start production in the second quarter in our Charleston facility in the USA. So with the EX30, the EM90, and the EX90, we are significantly strengthening our position in the market, especially in the premium electric segment, which is where we are focused for the future. We are not just building electric cars, but we are bringing new technologies that represent a paradigm shift for us and for our entire industry. Starting with the EX90, all of our cars built on our next generation fully electric platforms will be powered by AI enabled core compute. This will provide tremendous opportunities to harness the benefits of AI and of data capture. This further differentiates us from other mass EV cars that are simply electric cars with electrical propulsion, but they don't have the core compute architecture that provides the tremendous benefits that our next generation cars will have. With that, I will hand over to Bjorn, who will take us through the exciting journey that lies ahead in our full range. Bjorn?

Bjorn Annwall

Thank you, Jim. So clearly, the three new fully electric cars that Jim talked about will make our showroom even more attractive for consumers, so our growth journey on full electrification will continue. We will come to 50% fully electric car by 2025 and become fully electric by 2030. But it's important to point out that the transition to full electrification happens at different timescales throughout the world. And therefore, our plug-in hybrids and mild-hybrids continue to play a very important role. They will get further love and care with smart investments. We will see exterior upgrades, interior upgrades, and infotainment upgrades to these cars. The exact timings we will come back to. With this broad portfolio, we have the right portfolio to play throughout the world. On the electrification side, it's important for our sustainable future that we get fully electric, but it has to be done with sustainable margins. Therefore, it's really reassuring to see amidst all talk about weakening or softening BEV demands and lousy BEV margins for many players, but we, during last year, grow our BEV sales with 70%, and we increased the gross margin up to now 13% in quarter four, that's something that's been done with real hard work and focus over a long period of time. We have invested into making the cars better. Interiorly designed, fully electric motors is one example that has extended the range and made the car better....

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