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Strong Fourth Quarter for Volvo Cars After a Tough and Challenging 2006

9 February 2007

• Sales totalled 427,747 cars
• Strong sales increase in Russia and China
• Ethanol models were introduced on a number of European markets
• Volvo Cars started production in China
• Volvo C30 was launched on September 28 at the Paris Auto Show
• Volvo S80 was unveiled in Geneva on February 27
• Strong orders for the Volvo C70

On the whole, 2006 was characterised by uncertainty and difficulties for the entire auto industry. The prices of raw materials remained at record high levels, the total sales of new cars throughout the world weakened, and the political discussions relating to environmentally adapted alternatives to petrol and diesel-powered vehicles was accentuated during the year. And competition in the auto industry stiffened, if possible, even more.

Volvo Cars had two areas of focus in 2006. One was the continued creation of a cost-adapted structure in order to increase the company’s competitiveness through restructuring and efficiency measures in the industrial and administrative systems. The other was the continued implementation of an offensive product plan–seven new models between 2006–2009–by introducing the new Volvo S80 and Volvo C30 on the market.

"If we look back on sales from the beginning of 2006, we can see that there were three very tough quarters in succession in which we did not quite reach our ambitious objectives. However, in the fourth quarter, the trend changed and sales began to increase, and the quarter ultimately ended with an increase of over five percent compared with 2005," says Fredrik Arp, President and CEO of Volvo Cars.

"With respect to the launches of the new Volvo S80 and Volvo C30, it is apparent that both models have received a very positive reception by both the media and the market. They are two models that differ to a great extent, and which compete in two completely different segments, and attract different customers. I think that with these two models, Volvo Cars shows the fantastic strength and breadth of our model programme. Our challenge is now to deliver on a level with these promises," says Fredrik Arp.

Growing markets drive global sales
For the entire year of 2006, Volvo Cars sold 427,747 cars (retail deliveries) on over 100 markets on all continents. This is a decrease of 3.6 percent compared with 2005’s results, which totalled 443,947 vehicles sold.

Generally speaking, Volvo Cars’ global sales can be summarised by saying that the North American market has continued to be tough, Europe is unchanged, and Asia, together with a number of other smaller, growing markets, is driving sales.

Total American car sales, including light trucks, which includes SUVs, decreased by 2.6 percent, while at the same time, the trend clearly showed an increased customer interest in smaller cars. Total new-car sales in the United States for 2006 amounted to 16,556,064 vehicles. Volvo Cars retained its market share of just under one percent despite the fact that the company’s sales for the entire year decreased by 6.3 percent.

In Europe, new-car sales totalled 15,364,997 vehicles. This was a slight increase of 0.7 percent compared with 2005. Volvo Cars’ results on the European markets varied, but as a whole declined by two percent compared with 2005. Despite this, the company was able to retain its market share of 1.6 percent in Europe.

A number of the growing markets showed continued strong sales in 2006.

Volvo’s sales in Russia have truly taken off, and nearly doubled compared with 2005. Sales were 10,803 cars, an increase of 91.5 percent. The best-selling model was the Volvo S60, with 2,547 deliveries, followed closely by the Volvo XC90 with sales of 2,976 cars, and the Volvo S40 at 2,384 cars.

Interest for Volvo in China continues to grow, and in conjunction with the start of local production of the Volvo S40 at the Changan Ford Mazda’s production plant in the city of Chongqing, both interest and sales increased additionally, and sales grew by 50.3 percent compared with 2005. Sales results for 2006 showed that the Volvo S40 was the best-selling Volvo model in the country with sales of 3,289 cars. The Volvo S80 was a close second with 2,045 vehicles sold, including both the old and new versions of the car. A total of 1,843 XC90s were sold in China.

Another growing market worth mentioning is Australia, which had a 37.1 percent increase in sales.

Korea has shown interest in Volvo, and sales there increased by 32 percent in 2006–an increase that was driven primarily by the Volvo S60 and Volvo S80.

A number of the smaller markets in Central and Eastern Europe have grown in 2006. Examples of this include Hungary (+15 percent), Slovakia (+48 percent), Poland (+10 percent) and the Balkan countries, which together increased by 13 percent.

Countries in South America, such as Brazil, ArGhentina, Chile and the smaller markets in Central America have also shown strong increases in sales in terms of percentage. However, in this case, it is a matter of somewhat fewer vehicles sold.

Vehicles sold on the ten largest markets

Volvo Cars’ ten largest markets in 2006 (2005):

USA	115,818	(123,575)
Sweden	55,455	(52,696)
Germany	35,626	(35,035)
Great Britain	30,512	(38,307)
Spain	18,247	(18,335)
Italy	17,554	(20,533)
Netherlands	16,607	(18,879)
Belgium	11,844	(12,638)
Russia	10,803	(5,641)
France	10,726	(10,970)

Climate changes and the environment–the world’s primary focus in 2006
A global paradigm shift occurred in 2006 with respect to environmental issues. Numerous events and high-level political statements caused the interest of the general public, industry and trade, and the political system in environmental issues to come to life dramatically. For the automobile industry, this meant, above all, an increased focus on alternative fuels and more efficient drivelines.

The share of diesel-powered vehicles continues to increase in Europe since this reduces CO2 emissions compared with petrol-powered vehicles, resulting in tax rebates in most European countries. Volvo Cars’ sales of diesel models increased by 5.5 percent in 2006 to 156,904 cars compared with sales of 148,600 diesels in 2005.

Volvo Cars’ programme for ethanol-powered engines–Volvo FlexiFuel–for E85  fuel in the Volvo S40 and Volvo V50 models received a strong response from the Swedish market. At the same time, the introduction of E85 began on a number of markets in Europe, including the Netherlands, France, Switzerland, and Ireland. Additional countries will introduce E85 in 2007. The new Volvo C30 was launched with FlexiFuel as an alternative on a total of nine European markets in 2006.

Volvo vehicles sold per type of fuel

	2006	2005
Petrol	259,997	(292,864)
Diesel	156,904	(148,600)
Bio-ethanol E85 (FlexuFuel)	7,053	(378)
Methane (Bi-Fuel)	3,793	(2,105)

New technical safety features in 2006
In 2006, Volvo Cars presented a number of technical concepts for "active safety"–the ability to help the driver avoid traffic accidents–and personal security.

Among other things, the Driver Alert system was tested by the media and received a great deal of attention. The system senses when the driver is about to fall asleep and provides a signal to make him or her aware of this.

The new Volvo S80 was launched with a system that includes a collision warning and brake support. The car also had the Personal Car Communicator (PCC) system in the ignition key. This function provides the user with information, from a distance, about the car’s security status. The system provides information as to whether the car is locked, if the alarm has been triggered, or uses a heartbeat sensor to monitor if an intruder is inside the parked car.

City Safety was another system that was presented. This is a system that helps the driver brake the car and thereby avoid low-speed collisions (at less that 20 mph/30km/h). It has been developed for a number of typical traffic situations that occur in city driving, such as rush-hour traffic jams, or when driving in car parks.

Production
The greatest change in 2006 was that Volvo Cars increased capacity at the plant in Torslanda, Sweden by instituting a third shift. This means that both final assembly facilities in Europe–Ghent in Belgium and Torslanda in Sweden now conduct operations round-the-clock.
The new S80 is produced in Torslanda and the new C30 is produced in Ghent.

Number of cars produced per plant (model in brackets)

	2006	2005
Ghent -S40, S60, V50, V70, C30	243,262	(267,978)
Torslanda - S80, V70, XC70, XC90	162,837	(188,518)
Uddevalla - C70	15,017	(1,622)

Number of cars produced per final assembly plant (model in brackets)

	2006	2005
China - S40	3,882
Malaysia  - S40, S60, S80, V50, XC90	779	(1,086)
Thailand - S60, S80, V70	384	(865)
South Africa - S40, V50	377	(1,519)

(Production in China, Malaysia, Thailand and South Africa is called "Knockdown" production. In other words, the cars are partially produced in the main plants in Ghent and Torslanda and partially built with locally produced material. The production in South Africa of Volvo cars ceased during 2006).

Awards and honours in 2006

Volvo XC90
Germany, Best imported SUV, Auto Trophy of Auto Zeitung
Malaysia, Best Premium SUV, The News Straits Times Awards 2006

Volvo XC70
Australia, Award of Excellence for Safety Feature, Sydney Morning Herald 2006

Volvo S80
Austria, Best sedan car award, Readers' poll "Autorevue" magazine
Belgium, Best lease car og the Year 2006, ING Car Lease

Volvo S40 – V50
Malaysia, Best Premium Family, The News Straits Times

The UK, Tow Car of the Year Award, British Caravan Club
 
Volvo C30
Germany, Golden Steering wheel, Bild am Sonntag

Germany, Best compact, Auto Trophy of Auto Zeitung

Germany, Best design, Auto Bild Magazine

Italy, World most beautiful car, L'Automobile più Bella del Mondo

The US, Best EU Import, SEMA Motorshow, Las Vegas
Volvo C70

The UK, Most Secure in Convertible Cat., British Insurance Car Security Awards

Other Awards

Belgium, Volvo Cars Ghent – Flemish HR Ambassador, D.E.N.K.-HR Consulting comp.

Germany, Ingrid Skogsmo – Woman of the Year Award, Automotive News Europe Magazine

Environment

France, Volvo Multifuel, S40 1.6D, V50 Flexifuel S60 Bifuel; 16 gold medals,11 silver, 1 bronze for env. Achievement, Michelin Bibendum Challenge for environmental vehicles

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