Volvo Cars sees flat or lower retail sales this year

People look at a Volvo XC40 car during the Beijing International Motor Show or Auto China show in Beijing, China, September 26, 2020. REUTERS/Thomas Peter UPCOMING GLOBAL BUSINESS WEEK

STOCKHOLM, July 20 (Reuters) – Volvo Cars ( VOLCARb.ST ) saw a potential drop in retail sales this year after reporting higher profits in the second quarter.

Supply problems, primarily a global semiconductor shortage, have squeezed production and retail sales in recent quarters, but Volvo said it was seeing “visible improvement” in stabilizing its supply chain.

The Sweden-based carmaker said on Wednesday it expects full-year retail deliveries to be lower than or on par with 2021, while wholesale volumes will pick up.

“However, due to the time lag between production and retail deliveries, these improvements are not expected to result in an increase in retail sales during the calendar year,” the company said.

Volvo chief executive Jim Rowan said the company would “monitor” consumer sentiment, not least because of higher inflation.

“But demand is very strong right now,” he said.

Volvo’s quarterly operating profit rose to 10.8 billion Swedish crowns ($1.06 billion) from 4.8 billion a year ago, as the accounting effects of the listing of high-performance car maker Polestar provided a boost.

Operating income for the core business of Volvo Cars, majority owner of China’s Geely Holding ( GEELY.UL ), reached 4.6 billion in the quarter.

“Volvo reported a solid set of second-quarter results in light of multiple headwinds, including semiconductor constraints and the impact of Chinese lockdowns on demand,” investment bank JPMorgan said in a note.

($1 = SEK 10.2089)

Reporting by Helena Soderpalm; editing by Niklas Pollard and Carmel Crimmins

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