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Although The Chip Woes Linger, Volvo’s Profits Beat the Forecast

TNI || New Delhi || 21st Oct 2021

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AB Volvo from Sweden has crossed their third-quarter core earnings due to the high demand for its trucks, even though a lingering chip shortage has hampered the production. Volvo, in a statement, said that chip shortage of components and capacity of freight led to disruptions in production, thereby increasing the cost.

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The company has further said that they are expecting more disruptions and stoppages in the days to come, both in the production of trucks, as well as other parts of the group.

Although there has been a recovery in the quarter, the group’s sales and earnings after adjustments remained below par vis-à-vis pre-pandemic levels.

JP Morgan has gone on to mention that Volvo has produced s solid set of results despite disruptions at regular intervals because of COVID-19.

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The investment bank said that notwithstanding semi-conductor shortages and issues related to the supply chain, they expect consensus expectations to be higher, even if it is negligible.

Volvo, which competes with Daimler and Traton in various segments, has confirmed that the orders of its trucks have reduced by 4% as compared to last year. However, the bank has a promising forecast for the truck registrations estimating that the U.S. market will reach 270,000 in 2021, and next year it will go up to 300,000.

There is a robust demand, but a global semi-conductor shortage has restricted Volvo from exploiting it to its capacity.