STOCKHOLM -- Volvo Car Group boosted its earnings goal for the year after its operating profit rose 71 percent in the first half as strong demand in Europe offset slower development in its other main markets, China and North America.
First-half operating earnings rose to 1.66 billion Swedish crowns ($194.66 million) from 968 million a year earlier, Volvo said in a statement today. Revenue rose a 12 percent to 75.2 billion crowns ($8.8 billion), helped by a 1.4 percent gain in deliveries.
CEO Hakan Samuelsson said Volvo expects a "substantial" increase in profits for the full year as the robust European market outweighs a slowdown in China. The automaker had previously forecast a "clear" improvement in sales and profitability.
Volvo aims to grow at least in line with the premium car market in China this year, as it starts shipments there of its new flagship model, the XC90 SUV, Samuelsson said.
Concerns over slowing growth and share price turmoil have clouded the outlook for China in recent months, raising questions about the scope for further booming expansion in the world's biggest auto market.
"The price situation in China is getting tougher," Samuelsson said. "The important thing is to see the strength of having Volvo global. We can balance out softer development in China."
Volvo is banking on strong growth in China to generate the volumes needed to finance its five-year, $11 billion spending plan to develop new models. It also needs growth elsewhere to meet a goal of nearly doubling sales to 800,000 cars in 2020.
The automaker plans to open a U.S. factory near Charleston, South Carolina, in 2018 with initial annual production of 100,000 cars.
Samuelsson said Volvo still expects to reach sales of close to 500,000 cars this year with Europe and improvements in the U.S compensating for slower growth in China. "We have Europe which is currently in strong growth and we have the U.S., which is going from a problem situation into growth," he said. "That, I think, shows that a normalization in China is something we can live with."
Retail sales during the first six months were 232,284 cars, up slightly compared to 229,013 in the same period last year, driven primarily by strong demand in Europe, Volvo said. Sales in China were flat, while sales in the U.S. "stabilized" during the period.
Volvo said today it has received 57,000 orders for its new XC90, which went on sale in Europe in June and in the U.S. last month.
Volvo is still far less profitable than premium rivals. Its profit margin on its 232,284 vehicle sales was 2.2 percent in the first half, while luxury-car market leader BMW posted an 8.9 percent margin on 1.1 million deliveries.
Sweden-based Volvo was bought by China's Zhejiang Geely Holding Group from Ford Motor Co. in 2010.
Volvo is taking control of its three joint ventures in China, paying 2.2 billion kronor to lift its stakes in the entities to 50 percent, Volvo said separately today. The Chinese JVs with Geely Holdings include car factories in Chengdu and Daqing, engine manufacturing in Zhangjiakou and a Shanghai research and development center.
Reuters, Bloomberg and Automotive News Europe contributed to this report