Volvo profits nose dive more than 80% due to costly new factory

Posted on 18 Apr 2013 by Tim Brown

Swedish carmaker Volvo is set to report a big operating loss in China for 2012 as thin sales and a costly new factory weighed on results, Swedish daily Svenska Dagbladet reported.

Volvo Car Corporation, wholly owned by China’s Zhejiang Geely Holding Group since 2010, is set to report a loss of between 2 billion (£202m) to 4 billion Swedish crowns in China.

The report said that high costs for a new plant in the south western Chinese city of Chengdu,which was nearly complete, plus expenses related to building up a network of Chinese dealers and weak overall sales in the country were to blame.

The losses in China are not unexpected after Volvo suffered an 11% decrease in sales in the country last year while it has been investing heavily to establish its first local production in the world’s biggest auto market.

The struggling Swedish brand has also been busy cutting jobs and costs as European sales have taken a hit due to the crisis.

Volvo earnings before interest and tax slumped to 239m crowns in the first half of 2012 from a year-earlier 1.53bn, but at net level the group made a loss of 254m crowns.