Volvo Cars profit rises in first half

STOCKHOLM: Volvo Car Group sold more vehicles in Europe and China in the first half that helped drive up earnings 21% and said it would set up a joint venture with its Chinese parent to share technology with other brands in the Geely group.

Under Chinese ownership since being bought by Zhejiang Geely Holding Group from Ford Motor Co in 2010, Volvo has taken on larger rivals such as BMW AG and Daimler AG’s Mercedes-Benz with new premium models.

Volvo, one of Sweden’s biggest companies by revenue, posted operating earnings of 6.8 billion Swedish crowns ($820 million) for the six months to June 30, against 5.6 billion crowns in the same period last year.

Revenues rose to 99.1 billion crowns, up from 84.2 billion crowns, and the company said it remained confident sales this year would exceed the record high set only last year.

The company aims to reach sales of 800,000 cars within the next few years. It sold 277,641 Volvos in the first half, up 8.2% from a year ago, as strength in China and Europe offset a lingering US slump.

Delivery problems have dogged Volvo in the United States this year, contributing to a 7% drop in first-half sales there. It does not have a manufacturing base in North America but is building a US plant to boost supply.

Volvo said it expected an upturn in the second half of the year and aimed to deliver “solid full-year growth” in the United States as tight global supply of its XC90 model eased and its new XC60 mid-size SUV hit the US market.

“The demand from customers is really there,” chief executive Hakan Samuelsson told Reuters. “In the second half, we will have the XC60 launched and that is really for the US market an even bigger car.”

In a step towards closer ties with other brands controlled by its Chinese owner, Volvo said it was creating a joint venture with Zhejiang Geely to share technology.

Volvo, Geely Auto and LYNK & CO, a brand established last year and positioned between Volvo and Geely in price, would share vehicle architecture and engine technology via cross licensing arrangements managed by the venture.

“We will unlock significant benefits across our portfolio by sharing both technologies and next-generation vehicle architectures,” Zhejiang Geely chairman Li Shufu said in a statement.

“I am confident these synergies can be achieved while preserving the separate identities and strategic autonomy of our different automotive brands,” he said.

Samuelsson said the deal would provide Volvo with greater development resources and speed up introduction of new technology in areas such as components for electric vehicles.

“And, maybe most importantly, we can lower the material cost because we will have a higher volume for the common components and will source them jointly,” he told Reuters.

With earnings and sales rising, speculation has been growing that an initial public offering (IPO) is on the cards.

Last year, Volvo took a step towards listing, raising five billion crowns from Swedish institutional investors through the sale of newly issued preference shares.

But the carmaker said it had no immediate plans for an IPO.

“We try to act as a listed company, but currently we are not planning an IPO,” Samuelsson said.