Volvo makes return to profit thanks to strong growth in China

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Chinese-owned Volvo Car Group raised its outlook for 2014 sales after returning to profit in the first half as strong growth in China and a moderate upturn in Europe more than offset lingering weakness in the United States.

Gothenburg-based Volvo, one of Sweden’s top exporters and employers though a small player in the global autos industry, saw demand gain traction during the end of last year and figures yesterday showed momentum had carried into 2014.

After a 9 per cent rise in sales for the first seven months of 2014, chief executive Hakan Samuelsson said he saw sales growing “close to 10 per cent” this year compared to a previous forecast of “a good 5 per cent”.

Bought by Zhejiang Geely Holding Group from Ford Motor in 2010, Volvo has ambitious sales goals aimed at helping fund investment needed to take on larger rivals.

“We came in at nearly 10 per cent in the first half and for the full year we expect growth to continue at that level,” Samuelsson said, pointing to continued expansion in China.

“We will continue to grow faster than the market (in China) if at a slightly slower pace. We expect to have a volume of a bit more than 80,000 cars in China this year,” he said. Lifted by China as well as recovering volumes in Europe, Volvo reported operating earnings of 1.21 billion crowns ($176.5m) for the first half versus a loss of 577 million a year earlier.

Revenues rose 15 per cent to 64.8 billion.

The company aims to nearly double annual sales to 800,000 cars by 2020 and make inroads in a premium market dominated by rivals such as Daimler’s Mercedes-Benz and BMW.

Volvo this month is launching its XC90 SUV, the first fully new car developed under its Chinese ownership, and has said it plans to price its new premium cars at the same level as those of its German competitors. While its Chinese business is taking off, a lack of new models has seen Volvo’s US sales fall to roughly half of what they were a decade ago, totalling only 61,233 cars last year.

“In the US our target is to keep volumes flat (this year). We face large challenges there and they will remain,” Samuelsson said.