Volvo Cars reports that its gross profit margins on its electric cars increased fourfold during the second half of 2023, contributing to a record trading year for the company.

The improvement, to 13%, was versus the end of 2022 when high lithium prices heavily hampered EV profitability, but the company saw a clear uptick in the underlying profitability of these cars from the second half of 2023 as lower lithium prices and the effects of increased pricing materialised.

Volvo said while there is still a gap in gross margins on the EVs compared to some of its combustion engine (ICE) cars, this gap is closing.

The EX30, Volvo's new entry-level electric car, is set to deliver gross margins of 15-20% and takes the company closer to that goal. Volvo Cars also expects the upcoming EX90, which goes into production in Q2, and EM90, both large electric cars, to contribute to closing the gap between EV and ICE margins.

A new all-time sales record of 708,716 cars enabled revenues to rise by 21 per cent to SEK 399.3 billion for the full year 2023. The underlying operating profit of SEK 25.6 billion, excluding joint ventures and associates, represents an increase of 43 per cent compared to 2022. The operating margin excluding JVs and associates came in at 6.4 per cent, up from 5.4 per cent in 2022.