Volvo Group’s chairman says the war in Ukraine has underlined just how important it is for businesses to be “prepared for everything”, as he advised leaders to be “realists” about the long-lasting impact the disruption will cause.
“None of us know how long this will continue, if it’s two weeks or two years,” said Carl-Henric Svanberg in an interview with CEO Martin Lundstedt ahead of the company’s annual general meeting tomorrow. “But in the same way as after World War I and World War II, after the fall of the Soviet Union, we have to think about what the world order will look like. How it will affect free trade, how we are going to secure supplies.”
Given oil and gas prices have risen sharply since Russia’s invasion of Ukraine he is clear, however, that it will drive forward the switch to electric-powered vehicles.
“There is no doubt the green transition will accelerate,” he added. “Europe is the only part of the world that is not self-sufficient with energy, and we are far too dependent on gas and oil from Russia. So even if Sweden has a better position, we are more energy independent, it will accelerate the green transition.”
Volvo embarked on its move to electric in 2015 and has set a target to make 50% of its sales fully electric by 2025, with that figure jumping to 100% by 2030. As part of this mission, Volvo has also invested heavily in its online channels, as well as looking to reduce the complexity in its product offer and provide transparent pricing.
If the business hadn’t already been on this path, Svanberg said it would have struggled to deal with the challenges of the past two years, with Covid, supply chain issues and now the disruption being caused by the war in Ukraine all having an impact.
He credited Lundstedt for turning Volvo into a “strong company” through this period, one that has been able to “perform at its peak and has the ability to reset during change”.
“If we had not made the successful change since 2015 then we would not have handled this very well,” he added. “It has been an intense [few] years and 2021 was no exception.”
There is no doubt the green transition will accelerate.
Carl-Henric Svanberg, Volvo
The Volvo Group’s net sales for the full year increased to SEK 372bn (£30.17bn) with an adjusted operating income of SEK 41.0bn (£3.32bn).
Direct-to-consumer (DTC) sales also increased by 9% in 2021, with the car marque saying in February it plans to use the UK as a “pilot market” for exploring new sales strategies.
“We have lived in a situation with many challenges, of course, but we have also seen the outlines of this transformation,” added Lundstedt. “We have taken big steps both technically and commercially over the year in terms of launching our battery electric products and services in all business areas. We accelerate. We have created a leading position over the year, but it’s just the start.”
Response to Ukraine war
Volvo suspended all car shipments to the Russian market on 28 February, making it the first carmaker to do so. At the time it said it made the decision because of “potential risks associated with trading material with Russia, including the sanctions imposed by the EU and US”.
As well as suspending operations, Volvo, which sold around 9,000 cars in Russia in 2021, has also been working to support its colleagues who have been affected by the unrest.
Volvo has 63 employees in Ukraine and many partners within the service business who work in and around the Volvo organisation. It also has more than 1,300 employees in Russia.
CEO Lundstedt said the Volvo company has “come together as a team” across markets and divisions to provide support where needed.
“We have just over 1,300 employees in Russia who we need to take care of and work with during this situation. Initially the sanctions imposed by Europe, the US and Great Britain and also other circumstances led [us] to quickly and temporarily stop both sales and production in Russia. When that was done, we returned and continued to focus on how we work with the safety of our employees, and how we work with humanitarian support.”
Volvo’s organisations in nearby countries like Poland, Hungary, Romania and the Czech Republic have also been part of these efforts.
“It’s about supplies for people who flee Ukraine, but also our colleagues and their families. It’s food and it’s clothes, it’s medicine and toys. It’s also helping with accommodation. We have offered accommodation in our own premises but also opened up a closed hotel and created accommodation there.”
The company has also continued to donate to organisations like the Red Cross and UNHCR, as well as matching donations from employees.