<
https://thedriven.io/2024/07/08/how-volvo-crossed-the-valley-of-death-in-transition-to-all-electric-cars/>
"Many electric vehicle naysayers persist in suggesting that “EVs will never
profitable” or that “EVs cost manufacturers (insert random $ number) per car
sale to sell”.
However, even if it was momentarily correct – at a point in time for a certain
model – this is [so] standard for new product development cycles that it has
even been given the name, the “Valley of Death”. Volvo’s results for the past
12 months make for interesting reading as to how one legacy manufacturer is
dealing with this EV Transition Valley of Death.
The Valley of Death is often used to describe the gap in revenue and income
between the cost of developing a new product and large-scale sales.
In other words, it is the period between a business haemorrhaging capital and
operating costs when developing the new product and rolling it out in numbers
enough to create ‘the economies of scale’ needed to become both price
competitive and recoup those development costs.
The Valley of Death is where the majority of start-up businesses fail. It
almost claimed Tesla and many fund managers bet and lost billions that it would
fail. For legacy auto manufacturers, with expectant shareholders used to
profits, it’s a particularly challenging period, as we can see with the
pull-backs from the US car companies such as GM and Ford.
So how did Volvo Cars do in 2023? Well, they had a record-breaking year and
reported the highest full-year retail sales, revenues and operating profit in
its 97-year history.
A new all-time sales record of 708,716 cars enabled revenues to rise by 21 per
cent to SEK 399.3 billion ($A56.37 billion). The underlying operating profit of
SEK 25.6 billion ($A3.61 billion) represented an increase of 43 per cent
compared with 2022. Their operating margin came in at 6.4 per cent, up from 5.4
per cent in 2022.
In terms of numbers, the company sold 113,419 fully electric cars in 2023, an
increase of 70 per cent over 2022 and representing 16 per cent of its total
global sales volume. This by the way was one of the highest amongst the legacy
premium carmakers. Compared with 2022, Volvo Cars increased its global electric
market share by 34 per cent."
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
