Volvo Cars 2015 Profit Triples as XC90 SUV Exceeds Targets

  • Operating margin more than doubles to 4% vs. 1.5% a year ago
  • Chinese-owned carmaker forecasts record deliveries for 2016

Volvo Car Group’s earnings tripled last year after higher-than-expected sales of the revamped XC90 sport utility vehicle helped push deliveries above 500,000 vehicles for the first time.

Operating profit rose to 6.62 billion kronor ($778 million) from 2.13 billion kronor in 2014, the Gothenburg, Sweden-based company said Thursday in a statement. Revenue rose 19 percent to 164 billion kronor after deliveries reached an all-time high for a second consecutive year. The carmaker said it expects a third year of record vehicle sales for 2016.

The boost comes as Volvo modernizes its production lines as part of an $11 billion spending plan. Last year’s XC90 was the first car wholly developed and produced during the ownership of billionaire Li Shu Fu’s Zhejiang Geely Holding Group Co. Volvo is rolling out a follow-up this year with the S90 luxury sedan, with the aim of winning customers away from BMW, Mercedes-Benz and Audi. The goal is to push sales to 800,000 cars, which would still pale in comparison to the BMW brand’s sales of 1.9 million autos last year.

“There’ll be clear growth this year,” Chief Executive Officer Hakan Samuelsson said in a phone interview, adding that he sees no change in trajectory in any of Volvo’s major markets. “We’ll also continue improving on profitability.”

Volvo on Thursday also unveiled a third revamped vehicle as part of the top-of-the-line 90s series. The V90 station wagon features semi-autonomous driving systems and is available in a plug-in hybrid version with a 50-kilometer (31-mile) range. The carmaker is enlarging its production network, announcing in November it’ll build its first plant in the U.S. to help revive sales in North America that have halved over the past decade.

The company will stick to the “bread and butter” of SUVs, sedans and wagons as it replaces its entire lineup by the end of the decade, Samuelsson said. “We’re not going to expand the product portfolio to other types of vehicles like coupes or minivans.”

Global sales rose 8 percent last year to 503,127 cars, while the operating return on revenue rose to 4 percent from 1.5 percent a year earlier. That compares with a 10 percent operating return on sales for Mercedes-Benz Cars last year. Volvo has set a goal of boosting profitability to the level of other luxury carmakers by 2020.

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