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CONSUMER CYCLICALS: Volvo Cars (VOVCAB Ba1/BB+/NR): Capital Markets Day

CONSUMER CYCLICALS

Marginal credit negative although bond prices are unmoved; expectations were already somewhat subdued.

  • Volvo Cars has released updated medium-term targets. Its 2026 EBIT margin target is 7-8%, down from “above 8%” blaming global trade and tariffs.
  • Its 2026 SEK550-600bn revenue target has been replaced with an ambition to “continue outgrowing the premium car market until 2026, as it has done in recent years”. Consensus expectations were already well below at 499bn.
  • Electrification targets were dialled back slightly yesterday, with a tilt towards hybrids included today.
  • FCF neutrality targeted for 2024 and 2025 are unaffected, followed by “strong” FCF from 2026 which will presumably be tempered by the margin revision.
  • Margins are lower than they were in 2021 when they sat below Moody’s rating threshold, although the deconsolidation of Polestar will be a positive adjustment for them.
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