Everything looked so good this summer. Volvo Cars CEO Håkan Samuelsson was confident of victory at the half-year report. Sure, profits were down, but he believed in stronger sales and a strong positive cash flow.
After all, he had an ace up his sleeve for the European market: the new electric SUV EX60, technically advanced and from which Volvo will make a lot of money per car sold.
Now you have to rub your eyes: The operating loss in the third quarter of SEK 5.6 billion is to be compared with SEK 6.4 billion in profit for the same period last year.
Turnover fell by almost 23 percent.
The real trouble is the cash flow: minus 8.9 billion. Billions are needed for 13 new models until 2030. That is why Samuelsson is now presenting a savings package of five billion kroner. 2,500 jobs will be lost, of which 2,000 in Sweden.
And it could be more. Samuelsson opens on Friday for new savings already at the beginning of next year if this is not enough. Every day now becomes important in order not to capsize completely.
What is the loss due to? The answer in one word: the China market. After decades of laughing and rolling the eyes, Chinese brands have overtaken Western brands in software and technology - at lower prices. The Chinese clearly prefer domestic brands to Volvo, BMW or Audi.
As recently as last year, China was Volvo's single largest market, followed by the United States. But this quarter, sales plummeted 41 percent and turnover almost 50 percent. Samuelsson now warns of two more tough years in China.
In the USA, too, 9 percent is lost, while there was an increase of 2 percent in Europe.
Phew. Europe is thus the light in the darkness. Here, the EX60 has received over 50,000 orders.
But it can quickly be extinguished.
The European market is under pressure from all sides. Chinese car brands are storming in, while European manufacturers are releasing electric cars on a string of pearls - in a market that is 2.5 million cars smaller than before the pandemic.
In September alone, Chinese brands' sales in Europe increased by 104 percent. Their market share almost doubled from 7.4 to 14.5 percent, according to the analysis company Dataforce.
But now the new electric SUV EX60 will save Volvo. The problem is the manufacturing at Torslanda. Automotive News now reported in October that the production rate is 90 percent below the target. It gets complicated when the battery is to be integrated into the body. Samuelsson says that production is improving, but could not say on Friday when it will be fully operational.
The EX60 is a great car and is at the forefront of software development with its central computer - I say after test driving it over 120 miles. But the competition is fierce: BMW IX3 and Mercedes GLC are usually casually mentioned.
But the real price pressure in Europe comes from China, despite electric car tariffs of up to 45 percent.
Two examples: The group colleague Zeekr 7X is almost as big as the Volvo EX60, but costs SEK 60,000 less and has a slightly longer range.
The Leapmotor C10 is almost the same size and runs ten miles less, but is SEK 240,000 cheaper.
Going forward, the plan looks strong: Volvo will launch 13 new models by 2030, six of which will be developed specifically for China with technology from Geely. It goes faster and gives Volvo a big cost advantage.
The problem is getting through the next year. Volvo's net cash has disappeared like the last eddies down the bathtub drain: from SEK 26.9 billion at the turn of the year to just SEK 1 billion at the end of September.
Certainly. There is SEK 55 billion in total liquidity reserve including credit commitments, but it is not time to keep losing money. Volvo must turn the tide now. Immediately.
The savings package buys time, but does not solve the problem. Volvo must start selling more newly developed cars with significantly better profitability.
Here's what Volvo balances on a knife's edge:
1. The EX60 is vital for Europe and must come into full production. The new smaller electric SUV, which is expected to be called the EX50 and will arrive next year, is also vital.
2. Above all, two new China models, which will be launched next summer, must be successes at lightning-fast "China Speed". It determines Volvo's future.
Håkan Samuelsson thus knows where he is going. The question is whether he can get there.
