After reporting greater second-quarter profits, Volvo Cars warned of a possible drop in retail sales this year.

Supply issues, most notably a global scarcity of semiconductors, have crimped manufacturing and retail sales in recent quarters, but Volvo reported a “significant improvement” in supply chain stabilisation.

The Swedish automaker said on Wednesday that full-year retail deliveries will be lower or on level with 2021, while wholesale volumes would rise.

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

Volvo CEO Jim Rowan stated that the company would “keep an eye on” consumer attitude, owing to increasing inflation.

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

Volvo’s quarterly operating profit increased from 4.8 billion Swedish crowns to 10.8 billion Swedish crowns ($1.06 billion) due to accounting impacts from the listing of high-performance vehicle Polestar.

The operating earnings for Volvo Cars’ main company, which is majority owned by China’s Geely Holding, hit 4.6 billion in the third quarter.

“Volvo reported a solid set of Q2 results in the light of multiple hurdles including semiconductor constraints and impact of Chinese lockdowns on demand,” investment bank JPMorgan said in a note.

(Adapted from AutoNews.com)