Volvo car GROUP IN brief • Positive EBIT first half of 2012 • Sales performance affected by weaker market • Transformation programme on track • Launch of all-new V40 • Signed Memorandum of Understanding with Zhejiang Geely Holding to evaluate future co-operations • Established Financial Services in the US Key figures 2012 2011 2011 H1 H1 FY Retail sales, 000 221 231 449 China 21 21 47 USA 35 36 67 EU 20 123 136 252 Rest of World 42 38 83 Financial Report Revenue, BSEK 65 63 126 EBIT, MSEK 239 1,529 1,636 Operating cash flow, JanuarY – June 2012 MSEK 280 3,618 5,869 I this is the volvo car group Vision Volvo Car Group’s history goes back to 1927 when the Swedish company Volvo Car Cor- To be the world’s most progressive and poration was founded and the first Volvo car was launched. Volvo Car Group is headquar- desired luxury car brand. tered in Gothenburg and has its major manufacturing plants in Torslanda, Sweden and in Gent, Belgium. In 2011 our 2,238 dealers sold 449,255 cars in more than 100 countries around the world. In 2010, Zhejiang Geely Holding Group acquired Volvo Car Group from Ford Motor Company. We currently employ around 22,400 people, including around 800 objectives staff relating to the build-up of China as the future second home market. Provide cars people want tHe trAnSFormAtion oF tHe VolVo cAr group Sell over 800,000 vehicles globally Volvo Car Group is going through an encompassing transformation. Have a top tier luxury car brand perception A completely new vehicle architecture – Scalable Product Architecture (SPA) – will pro- Deliver top industry return on invested capital vide the foundation for products that will deliver the Volvo brand’s key components: safety, Be the employer of choice modern Scandinavian design, environmental care and driving dynamics. The new products, coupled with the industrial and commercial plan in China, will enable Volvo Car Group to reach the ambitions in global sales volumes of 800,000 cars. About this report The financials in this report refer to the consolidated business result of Volvo Car Group. This includes Volvo Car Corporation (Volvo Personvagnar AB), its parent company Geely Sweden AB, and all its subsidiaries such as Volvo Car NV Belgium, all sales companies around the world including North America, Volvo China Investment Co Ltd, and Volvo Cars Real Estate and Assets AB. Joint ventures and minority interest, are reflected in accordance with IFRS accounting principles. Audited annual reports are filed in accordance with local statutory requirements for all legal entities within the group. In Sweden, audited annual reports for Geely Sweden Holdings AB, Geely Sweden Automotive AB, Geely Sweden AB and Volvo Car Corporation, are filed with the authorities on an annual basis. VOLVO CAR GROUP H1 2012 Ceo comment A positive ebit In A time of TrAnsition In a competitive market situation and amidst the most encom- lines in important areas like engine and power train, and will help us passing transformation in the history of the company, Volvo Car delivering on our brand’s key components: safety, modern Scandina- Group reports a positive Earnings Before Interest and Taxes vian design, environmental care and driving dynamics. Moreover, (EBIT) for the first six months of 239 MSEK (1,529). SPA will deliver a cost structure ensuring competitiveness in the marketplace. We are following our plan with this important initiative Retail sales amounted to 221,309 cars in the first six months of which represents the largest part of our total long-term transformation 2012, a decline of 4 per cent. This is a consequence of weaker investments. The Torslanda plant in Sweden is now being upgraded demand in combination with a transition in our product programme, in order to meet the requirements of the SPA architecture, for which where we have phased out our previous S40 and V50 range and production will commence in early 2015. introduced the all-new V40. We see weaker sales in 2012 on most The second important initiative is our industrial and commercial of our markets compared to 2011, and our sales development will be plan for China, Volvo Car Group’s future second home market, aiming our biggest challenge going forward. at structures and capabilities for annual sales of 200,000 cars. Our In this market situation and amidst the most encompassing trans- manufacturing footprint is developing according to plan, awaiting formation in the history of the company, the Volvo Car Group reports a governmental approval. We are establishing our local R&D center, positive EBIT for the first six months of 239 MSEK (1,529). We have strengthening our dealer network and competence in our brand and taken a pro-active approach to protect margins, staying prudent and investing in on-site consumer insight. The strong sales development not participating fully in incentive wars in some markets. in 2011 has declined during the first six months and puts pressure The all-new V40, launched this spring, will start to support sales in on areas in our go-to-market capabilities, areas that are now being the second part of 2012. We are thrilled by the reception of the car, addressed in order for us to be prepared once local production has and given our orderbooks are full, we are reviewing the possibility of been approved. increased capacity. The economical uncertainties in most of our markets will remain Another important product launch during the first half year was for the rest of the year, and competition is stiff. 2012 and 2013, are the V60 Plug-in-Hybrid, the first proof point of our ambition to devel- transition years where our ambition will be to protect volumes and op Volvo Car Group into a leading actor in car electrification. The V60 margins, while developing our future product programme and estab- Plug-in Hybrid will come into production in November, and we have lishing China as our future second home market. We are currently met a strong interest in the fleet market. We have received orders of a taking measures on the cost side, but our strategy remains and so do 1,000 cars, corresponding to our production capacity for 2012. our objectives. The all-new V40 and the V60 Plug-in Hybrid are early deliverables We are building robustness into our group and we have begun our on the new strategy, launched in 2010 following the Zhejiang Geely transformation journey. Our strengths lie in dedicated employees, a Holding’s acquisition of the Volvo Car Group. We aim high, with a clear vision and a long-term strategy that will transform our com- goal of selling 800,000 cars globally in 2020. In order to reach this, pany into a truly luxury car brand that will meet the expectations of we need to take major development steps in the areas of products, demanding Volvo customers around the world. production and competence. Backed by committed owners, we are on track to deliver on the changes needed. Two initiatives are key in our transformation strategy and thus driv- ing several other initiatives. Number one is our new scalable product Stefan Jacoby architecture, SPA, which will drive commonality across all our product President and CEO VOLVO CAR GROUP H1 2012 1 Market development economic downturn AffectinG ThE car Industry Car Industry Development In Europe, the first half of 2012 has seen unfavourable macro ingly fierce as car makers aim to regain volumes after the previous economic conditions, resulting in a negative development for the car economic downturns. The US market totaled 7.26 million units in industry. In the first half of 2012, the European car industry was down the first half of 2012, up 13.7 per cent from 6.39 million in the same 6.5 per cent to 6.73 million units (7.20 million). The Swedish car period of 2011. The car market in China increased by 6.8 per cent to market amounted to 143,000 units, down 9.2 per cent from the 2011 6.5 million units (6.04 million). volume of 157,000. In all markets, competition has become increas- Industry development (total passenger vehicles registered) 2012 2011 Change, 2011 000’ H1 H1 % FY China* 6,454 6,041 6.8 13,150 USA 7,262 6,385 13.7 12,623 EU 20 6,731 7,197 (6.5) 13,256 of which Sweden 143 157 (9.2) 305 * Preliminary figures for 2012 H1 volvo car GROUP Retail Sales Volvo Car Group’s global retail sales for the first half of 2012 affected sales in Southern Europe in particular, with sales of Volvo amounted to 221,309 cars, down 4.1 per cent compared to the same cars in France, Italy and Spain declining more than 20 per cent com- period in 2011 (230,746). In 2011, Volvo was the fastest growing pared to the first half of 2011. Market share fell from 1.90 to 1.87 per luxury brand while sales in the first half of 2012 have been negatively cent. The Volvo XC60 crossover was the best selling model during influenced by uncertainty in major economies and a tougher competi- the period, followed by the V60 sportswagon and the V50 estate. The tive climate. all-new Volvo V40 as well as class-leading CO2 improvements in the For Volvo Car Group, the European market was heavily product range are expected to support sales growth. affected by the euro zone crisis, China reported a minor increase, the United States decreased moderately, while markets such as Russia United States and Japan showed a positive development.