Swedish automaker and auto seller Volvo is a private company with nearly a 100 years history. Their premium cars are sold in nearly 100 countries across the globe. In Latin, Volvo means “I roll” when conjugated from the verb volvere. According to their website, their company focus is on pioneering innovation while putting people first. The company is contemplating a 2021 IPO.
TL;DR
- Assar Gabrielsson and Gustav Larson decided to create a Swish car in 1924.
- The brand’s initial focus was creating a durable car that could handle the rough infrastructure and cold weather typical in Sweden. Their initial guiding principle was safety.
- In 1927, Volvo’s original car began rolling off assembly lines, the Volvo ÖV 4
- The company has raised 5 billion in Swedish krona from AMF, Första AP-fonden, and Folksam.
- In 1927, they made 280 cars and sold them in Sweden. In contrast, the company surpassed 500,000 cars sold in 2015 and has increased the number of cars sold each year through 2019.
- The Covid-19 pandemic affected sales and in 2020, they sold less cars than in 2019; but they still sold over 600,000. And first quarter 2021 sales broke all previous quarterly sales records.
- A 2009 class action lawsuit against Volvo was filed on behalf of 95,000 owners of 2003-2005 XC90 T6 SUVs alleging that the transmissions were faulty. Volvo settled the lawsuit. A 2010 class action lawsuit against Volvo is still ongoing regarding allegations of defective, leaking sunroofs. The plaintiffs need to provide more information for the lawsuit to continue. In 2012, Volvo was fined $1.5 million by the National Highway Traffic Safety Administration in the US for being too slow with issuing a safety recall related to tire pressure labels, airbag deployments and stalling issues.
- Due to the 2012 fine, Volvo has made internal corporate governance changes to its decision-making process regarding safety reporting and recalls.
- Volvo is seeking an IPO that reportedly could value the company at $20 billion.
Volvo at a glance
Volvo is an international manufacturing company headquartered in Gothenburg, Sweden. Volvo sells cars via 2300+ dealers and 100 national sales companies across the globe. The largest markets are China, the US, Sweden, the UK and Germany. It also sells cars online. Well known for being an automaker, the corporation also makes trucks, buses, heavy construction equipment, and marine drive systems and also has a financial services arm. Initially in 1915, Volvo was branded to be a subsidiary of SKF, a ball-bearing manufacturer, for a certain type of ball bearing. This did not happen and the founders of Volvo, Assar Gabrielsson and Gustav Larson, decided to create and manufacture a Swedish car tough enough to withstand the rough roads and winters experienced by consumers in Sweden. Gabrielsson was a sales manager with SKF and Larson was an engineer. While they were focused on innovating this new mechanical innovation, they were very aware of the implications for human beings and they made safety their top priority and guiding principle.
Volvo grew steadily. First it added trucks to its product line. In 1934, they added buses to their product lines. In 1935, it bought the vendor that they were buying engines from. This allowed them to enter the marine engine market as well. In 1942, they acquired a precision engineering company. Also in the early 1940s, they started manufacturing aircraft engines. In 1963 they opened their first assembly plant outside of Sweden with the Volvo Halifax Assembly Plant in Nova Scotia, Canada. In 1950, they acquired an agricultural and construction equipment manufacturer. Later they sold off the agricultural piece of the business and kept the construction equipment product line as Volvo Construction Equipment.
From the 1970s-1999, Volvo engaged in a variety of partnerships and collaborations with companies such as competitor Saab-Scania, Renault, Mitsubishi Motors and General Motors. Outright mergers were rejected however collaborations have continued. In March 2019, Volvo sold a controlling stake of its car telematics subsidiary WirelessCar to Volkswagen. In December 2019, Volvo and Isuzu formed a strategic alliance with Isuzu’s purchase of UD trucks from Volvo. In April 2020, Volvo formed a joint venture with Daimler with it’s purchase of half of Daimler’s fuel cell business. And in June 2021, Volvo started a partnership with a steel manufacturer, SSAB, to develop steel that is free of fossil fuels for future use in Volvo’s cars. These partnerships and collaborations help the company stay innovative.
Volvo has won hundreds of awards throughout the years but a few of the most recent are:
- 2021 Top Safety Pick+ for all 2021 Volvo models from the Insurance Institute for Highway Safety
- 2021 Best New Electric Car for the Volvo XC40 Recharge from Good Housekeeping
- 2021 Best New Car for the Volvo XC40 Recharge from Autotrader
- 2021 Best Resale Value for the Volvo XC40 from Kelly Blue Book
- 2021 Best Buy for the Volvo XC40 and XC90, from Consumer Guides
- 2020 #1 Innovative Technology Experience in the Automotive Industry for all Volvo models from JD Power US Tech Experience Index
Safety is still its number one guiding principle with sustainability and meeting personal needs serving as the other legs of the triangle. These philosophies have guided the company through many storms. From making and selling less than 300 cars its first year to now being on track to sell over 700,000 this year, the company has weathered economic downturns and natural disasters before – COVID-19 being no exception.
Currently at the helm is CEO Håkan Samuelsson, who has been in this role since 2012. Samuelsson has had a successful career at Sania and MAN. He has a Master’s Degree in Mechanical Engineering. The CFO is Björn Annwall, formerly a partner at McKinsey & Co. Annwall has a Master’s degree in business and economics and first joined Volvo in 2015. Since 2012, the head of Legal and Corporate Governance has been Maria Hemberg. Prior to joining Volvo, Hemberg had 25+ years of experience in business law – both in private practice and as in-house counsel. The head of Global Commercial Operations is Lex Kerssemakers. He first joined Volvo in 2004, left in 2008 and returned in 2010.
Volvo Cars’ core mission is: “We focus on transport solutions that make customers successful and create value for society.” It’s core values are customer success, trust, passion, change and performance. As you examine the history of the company, you can see how each of these values plays out with the development and marketing of various products. You can also see it in their impact arm. For example, in 1988, Volvo created The Volvo Environment Prize, an annual award for people making scientific discoveries in the areas of the environment and sustainable development. The prize is awarded in November each year and includes a cash award of SEK 1.5 million (around $US 215,000). According to Volvo’s website, the 2020 Volvo Environment Prize winner was Conservation biologist Professor Claire Kremen for her research at the intersection of protecting biodiversity and world hunger. Another way you can see Volvo giving back is that during the COVID-19 pandemic, the corporation allowed their fleet of corporate vehicles to be used by medical professionals working in coronavirus hotspots in the US so that they didn’t need to use public transportation – protecting the public and the brave medical workers.
Volvo fundraising to know about
Volvo is a private company that has done one major round of fundraising in its nearly 100 year history. It was a private equity round that raised SEK5B, 2016, led by AMF, Första AP-fonden, and Folksam.
Volvo has invested in three companies:
- 2018, Volvo was lead investor in Freewire Technologies, an electric vehicle charging station and power solutions company
- 2019, Volvo was an investor in Forciot, a sensor-based IOT solutions company
- 2021, Volvo was lead investor in Polestar, an electric performance car company
Volvo has acquired two companies:
- 2017, Luxe, an on-demand valet parking and car services app
- 2017, Garantibil, an e-commerce site for car deals
Path to the Volvo IPO
Volvo has been a public company before. It was first listed on the Stockholm Stock Exchange in 1935 and was traded on the NASDAQ from 1985 to 2007. Volvo Cars was part of AB Volvo from the start of the company in the 1920s until 1999 when it was sold to Ford Motor Company. In 2010, Ford Motor Company sold Volvo Cars to Geely Holding Group, a Chinese automotive corporation. Volvo Cars still shares the Volvo logo with AB Volvo and jointly runs the Volvo Museum in Sweden.
Geely explored an IPO for Volvo in 2018 but decided not to at the time. Now Volvo Cars appears to be clearing the way for an IPO because they are buying out Geely Holdings from their joint ventures in the Chinese market. Neither Volvo nor Geely Holdings have made the details of the transaction public. But once the deal is finalized, Volvo will have full ownership of its plant in Chengdu, its sales company in Daqing and its research and development facility in Shanghai. According to Capital Markets Analyst Hampus Engellau, “The clearer the ownership structure is, and the clearer the stakeholders in the company look, the easier it gets for investors to consider what it is they are investing in.” Thus, this is seen as a precursor to a greenlight for an IPO.
“These two transactions will create a clearer ownership structure within both Volvo Cars and Geely Holding,” Geely’s CEO Daniel Li said in July 2021. Volvo Cars CEO Hakan Samuelsson said in June 2021 that the company is exploring a 2021 IPO and in the meantime will continue to share platforms and components with Geely Holdings “ at an arm’s length” so that they’re operating more like independent companies.
When is the Volvo IPO date?
Volvo Cars issued a press release in May 2021 that they are exploring an IPO in their journey towards a fully electric fleet of vehicles. CEO Samuelsson had this to say, “A potential listing on the Nasdaq Stockholm stock exchange could create an opportunity for global investors to participate in our journey to become a leader in the fast-growing premium and intelligent electric vehicle segment while continuing to deliver on what customers expect from the Volvo brand.”
They have not yet filed; but industry analysts believe an IPO could value Volvo at up to $20 billion. With three other recent automaker-backed SPACs hitting the public markets, there is speculation as to whether Volvo will go to IPO traditionally or use a SPAC-merger. The three recent ones are Volkswagen-backed QuantumScape, an electric battery technology company; Daimler and Volvo-backed Luminar, a lidar developer; and BMW-backed Xometry, an online customer parts marketplace.
Related: What is a SPAC?
What investors should know about the Volvo IPO
All investments have risks. The important thing to do is to explore the types of risks investors might need to consider with a Volvo IPO. Risks specific to Volvo arise in the arenas of regulations and product development. Volvo’s automobiles are sold in over 100 countries – each with its own regulatory framework. Navigating this complex system of rules while simultaneously developing new products is complex. With China being a huge driver of recent growth and profitability for the company, there is a general sense that Volvo will benefit from the decision made by China, the world’s biggest car market, will be lifting its’ requirement for auto manufacturing to be carried out with a local joint venture partner in 2022. This portends growth potential for all automobile manufacturers.
The next area of risk for Volvo Cars is its journey to an all electric fleet of cars, plus its forays into autonomous vehicles and other technology innovations. Volvo is increasingly technology driven which means it needs to manage the risks of cybersecurity on top of product safety risks. The automotive industry is very competitive. Volvo’s competitors are: Penske Automotive Group, Navistar, MAN Truck & Bus, Scania, Daimler, PACCAR, Audi, Volkswagen and Tata Motors. All except Volvo Cars are currently publicly traded companies. McKinsey and Company predict that global car sales annual growth rate will be around 2% through 2030 compared to the 3.6% growth rate of the previous decade thanks to transportation services such as car-sharing and app-based ride-hailing.
Bottom line
Volvo is exploring a 2021 IPO that could value Volvo Cars at as much as $20 billion. No one is exempt from risk. They are poised to benefit from industry trends of electric car innovations and loosening regulation in China. If Volvo can continue to innovate while still maintaining safety and the sense of style and luxury that it’s customers associate with the brand, there is a potential for gain.