Volvo Cars CEO Suggests Global Chip Shortage Is Decreasing

Volvo Cars CEO Suggests Global Chip Shortage Is Decreasing

Volvo Cars, one of Europe’s top car brands, says it has passed the worst crisis in the supply of chips, which has put huge pressure on car production.

The company’s semiconductor stock is now “fully restocked,” CEO Jim Rowan told CNBC’s “Squawk Box Europe” on Wednesday.

“We had indicated in the first quarter that we were being hit by one specific semiconductor that was hindering production across most of our range,” added Rowan.

“We had generally predicted that we would be through that by the end of the second quarter, and that’s what we’ve seen. We’re through those semiconductor problems.”

The chip shortage took its toll on the auto industry, which has become increasingly dependent on semiconductors.

Mikael Sjoberg | Bloomberg | Getty Images

Semiconductors have been scarce for most of the past two years due to a series of problems with global supply chains caused by the Covid-19 pandemic.

This took its toll on the automotive industry, which has increasingly relied on semiconductors to control everything from the braking system to more high-tech features like interactive displays.

Stable as she goes

Volvo Cars, which plays in the more luxurious segment of the car sector, released mixed results for the second quarter on Wednesday. The company saw a 27% drop in retail sales, with 143,006 units sold in the three months to June, and a 2% drop in sales to Swedish krona 71.3 billion ($7 billion).

Operating EBIT, or earnings before interest and tax, came in at SEK 10.8 billion, more than double the 4.8 billion reported in the second quarter of 2021. Nasdaq.

Volvo Cars said its results were hampered by commodity price inflation and supply chain restrictions due to Covid lockdowns in China. The company is majority-owned by the Chinese car company Geely and has much of its production in the country.

Shares of Volvo Cars fell 7% on Wednesday.

Nevertheless, the automaker generally struck a clear note, characterizing the results as “stable” in the face of intense market turbulence.

Volvo Cars saw a “significant improvement in the stabilization of its supply chain, with production making a strong comeback in June,” the company said in its results release on Wednesday.

“In the second quarter, we were hampered by the lockdowns in China,” Rowan said.

“But now that the lockdowns in China are behind us, we are now back with semiconductors that are fully available again – at least for Volvo Cars.”

No delay in demand

Rowan added that the outlook for consumer demand also improved, despite headwinds from inflation and fears of a recession.

“We don’t see a decrease in demand,” he said. “Now we have seen raw material prices rise and overall we have been able to increase the prices of our products to offset those raw material price increases.”

“Even if we did, we won’t see a drop in demand globally.”

Volvo Cars has seen increasing demand for its Recharge line of plug-in hybrids and electric vehicles, Rowan added. The company aims to go all-electric by the end of the decade.

Still, in its earnings statement, the company said it expects 2022 retail sales to be the same or slightly lower compared to last year, “due to the time lag between manufacturing and retail deliveries.”