Global Chip Shortage To Extend Into 2022, Warns Volvo Cars As Its Reports Drop In Q3 Profit

The global shortage of semiconductors that started earlier is slated to continue to well into the next year, warned Volvo Cars. The global auto industry is one of the sectors that has been significantly impacted by the global shortage of chips.

The warning was issued by the company as it reported a drop in its revenues and profits in its first quarterly performance report since it got publicly listed on the stock market a month ago.

Supply chain issues throughout the world – including those for chips used in modern cars, still persisted, said the Gothenburg-based carmaker. It however said that while manufacturing and delivery of its cars were still lower than market demand, the situation had “improved month by month” since September.

“The supply situation has improved going into the fourth quarter, but we expect the industry-wide shortage of semi-conductors to remain a restraining factor,” Chief Executive Hakan Samuelsson said in a statement.

The initial public offering (IPO) launched on October 29 by Volvo was the biggest such deal in Europe so far this year. According to analysts, the company’s IPO underscored the strength for the European automotive industry which currently is going through a period of transition from conventional fossil fuel based vehicles towards greener electric vehicles.

Most major auto companies of the world have been forced to cut down production because of the global chip shortage, including forced production cuts imposed by Volvo. In the fourth quarter, the global chip shortage would be the major issue for the company, said its Chief Financial Officer Bjorn Annwall.

“No extra lockdown related problems,” he said in a n interview.

China’s Geely Holding holds a majority stake in Volvo.

The Chinese firm said that for November, the company’s preliminary estimation of the sales volumes for Volvo cars was about 53,000 units which was lower compared to the same month a year ago because of a fall in production as well as a clog in the inventory in transit.

Volvo also reported operating profit figure of 3.3 billion Swedish crowns ($362.6 million) for the third quarter, which it had previously announced, compared to profit of 4.6 billion for the same period a year ago. It also reported a 7 per cent year on year drop in revenues for the aforesaid quarter to 60.8 billion crowns.

While reaffirming its previously announced expectation for sales volume and revenue growth for the full year, the company also said it expected an improvement in its profitability, which it anticipates to touch pre-pandemic levels.

The stocks of the company have surged almost 28 per cent since its debut on the stock market.

The company has already announced its target to make only electric cars by 2030. Volvo owns a 49 per cent % stake in electric vehicle maker Polestar, which announced a couple of months ago of its intention to get listed on the stock exchange via a $20 billion deal

(Adapted from NewsNow.co.uk)

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