October 26, 2018 / 4:27 AM / 10 months ago

Higher tariffs, launch costs hurt Volvo Cars' third-quarter income

(Reuters) - Geely-owned Swedish carmaker Volvo Cars, which postponed plans for a listing this year, reported a nearly 50 percent fall in quarterly operating income, hurt by costs from product launches and the impact of higher tariffs.

The wheel hub of a Volvo XC60 car is seen during the 87th International Motor Show at Palexpo in Geneva, Switzerland March 8, 2017. REUTERS/Arnd Wiegmann

The company said operating income fell to 1.84 billion Swedish crowns (157.23 million pounds) in the quarter ended Sept. 30, from 3.67 billion Swedish crowns a year earlier.

Carmarkers have issued a string of warnings in recent weeks as the introduction of tougher European regulations on emissions has further clouded the outlook for the auto industry which is already grappling with the impact of an escalating trade war and slowing growth in major market China.

Volvo said on Friday slowing economic growth and intensifying trade challenges have hurt demand for passenger cars in China, but consumer appetite in its biggest market remained strong for its premium models.

It forecast continued strong profits and growth in revenue and retail sales in 2018, supported by its renewed product portfolio and lower capital expenditure.

However, CEO Hakan Samuelsson said the on-going trade tension between U.S. and China remained a worry for the company.

“The best way forward should be open, balanced trade with no car import duties for EU, U.S. and China,” he said.

The company, which opened its first U.S. plant this year and is now ramping up S60 production, said it had adjusted prices in certain markets, reallocated vehicles to other markets and shifted production in response to higher tariffs.

Volvo has sought exemption on imported vehicles and is shifting XC60 SUV production for the U.S. market to Europe from China to avoid Washington’s new duties on Chinese imports.

A company spokesman said Volvo had begun moving XC60 production from Chengdu, China to Torslanda, Sweden and expected that by the end of the year the larger chunk of U.S. exports of this model would be from Sweden.

He declined to say what the split between U.S. exports from China and Sweden currently was, but said whether the entire production would be moved to Sweden will depend on its ability to find the right suppliers.

To free up space in the Swedish plant, Volvo had also moved production of V60 out to Ghent, China and Belgium, he said.

Reporting by Esha Vaish in Stockholm and Bhargav Acharya in Bengaluru; Editing by Gopakumar Warrier

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