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Volvo posts record sales as China growth offsets U.S. weakness

February 26, 2015

If Chicago doesn't want them, Chongqing will take them. If Chicago doesn't want them, Chongqing will take them.
If Chicago doesn't want them, Chongqing will take them. Daniel Acker/Bloomberg—Getty

Geely-owned (GELYY) carmaker Volvo Car Group said its 2014 operating profit rose 17.5% in its best year of sales to date as rapid expansion in China and recovery in Europe took the sting off lingering weakness for the brand in the United States.

Volvo sold a record 465,866 cars last year but is still far from its goal of selling 800,000 cars in 2020 and making real inroads into a premium market dominated by German heavyweights such as Daimler AG’s (DDAIY) Mercedes-Benz and BMW AG (BAMXY).

Chief Executive Hakan Samuelsson told Reuters the carmaker expected to reach sales up around 500,000 cars this year as it outpaced underlying markets in Europe and China and returned to growth in its ailing U.S. business.

“We are planning for a new all-time high this year,” Samuelsson said in a telephone interview. “And we also see an improvement in profitability – a clear improvement in profitability during the second half of the year.”

The Gothenburg-based company, bought by China’s Zhejiang Geely Holding Group Co. from Ford Motor Co. (F) in 2010, said full-year operating earnings rose to 2.25 billion Swedish crowns ($302.00 million) from 1.92 billion in the previous year.

The company, one of Sweden’s biggest by sales and number of employees, is banking on continued strong growth in China to generate volumes needed to foot the bill for billions of dollars of investment in new models, but also needs growth elsewhere.

Samuelsson said he expected the European market to grow at roughly the same pace in 2015 as in 2014, when sales expanded around 5%, while the slowing economy in China dampened premium market growth there to around 10%.

Volvo’s turnover in the U.S., once its top market but now eclipsed by China, has eroded over the past decade due to a dearth of new models and financing options while the lack of U.S. production has left it sensitive to dollar swings.

The company, whose U.S. sales fell 7.0% last year, has put in place a raft of measures, including new management, to seek to reverse the trend while it is also eyeing exports of Chinese-made Volvos to the United States.

Volvo’s U.S. sales have levelled out in recent months, if at very low levels, and Samuelsson said he expected the brand to return to growth there this year.

Revenues across the group, which last year launched its first new car fully developed under Chinese ownership, rose to 129.96 billion crowns from a year-ago 122.25 billion, driven by sales of top models such as the XC60 crossover.