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VOLVO CAR GROUP results presentation Third quarter and first nine months 2018 Nils Msko, vice president & Head of investor relations Patrik Tolf, Deputy CFO & head of Group Finance DISCLAIMER By accepting this document, the person to


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VOLVO CAR GROUP results presentation Third quarter and first nine months 2018

Patrik Tolf, Deputy CFO & head of Group Finance Nils Mösko, vice president & Head of investor relations

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By accepting this document, the person to whom it is provided (the “Recipient”) agrees to be bound by the following obligations and limitations. This document has been prepared and issued by Volvo Car AB (together with its subsidiaries, “Volvo Cars”). The information contained in this document is derived from sources that have not been independently verified. Except in the case of fraudulent misrepresentation, no responsibility or liability is accepted by Volvo Cars or by any

  • f its respective officers, employees, affiliates or agents in relation to the accuracy, completeness or sufficiency of

any information contained herein or any other written or oral information made available by Volvo Cars in connection therewith or any data which any such information generates, or for any loss whatsoever arising from or in connection with the use of or reliance on this document and any such liability is expressly disclaimed. Analyses and

  • pinions contained herein may be based on assumptions that, if altered, can change the analyses or opinions
  • expressed. This document speaks as of the date hereof and in providing this document, Volvo Cars gives no

undertaking and is under no obligation to provide the Recipient with access to any additional information or to update this document or to correct any inaccuracies in it which may become apparent. Volvo Cars’ past performance is not necessarily indicative of future results and nothing contained herein shall constitute any representation or warranty as to future performance of Volvo Cars or any security, credit, currency, rate or other market or economic measure. Nor does this document constitute a recommendation with respect to any securities.

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

DISCLAIMER

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

3 Volvo car group

Highlights q3 2018

Production start in Charleston, US V60 cross country launched Polestar stand-alone AD concept revealed Retail sales +14% Net revenue +17.6% Operating income SEK 1.8bn Product launch costs, higher tariffs and license sales effects

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Comparable period: July– Sep 2017 Europe is defined as EU28 + EFTA

US +15.1%

26,307 units

China +14.1%

34,712 units

EUROPE +8.3%

69,318 units

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

retail Sales Q3 2018

Strong global growth

Global growth +14%

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Retail sales by carline Q3 2018 Retail sales by region Q3 2018

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

14% 25% 61% S V XC 45% 22% 17% 16% Europe China US Other

Retail sales q3 2018

Retail sales up 14%

Retail sales (units)

Q318 Q317 154,900 135,800

14%

Retail sales by carline Q3 2017 Retail sales by region Q3 2017

18% 30% 52% S XC V 47% 22% 17% 14% Europe China US Other

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Financials

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

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Net revenue (MSEK) Retail sales (units) EBIT (MSEK)

413,500 Q317 Q318 YTD17 135,800 YTD18 472,600 154,900

+14% +14%

Q318 Q317 YTD18 YTD17 48,300 56,800 147,700 179,600

+18% +22%

Q317 Q318 YTD17 YTD18 3,700 9,700 1,900 10,400

  • 49%
  • 7%

7.6% 3.2% VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

Net income (MSEK)

YTD17 Q317 Q318 YTD18 2,500 1,100 7,300 6,700

  • 56%
  • 8%

Investments (MSEK)

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Free cash flow (MSEK)

Q318 Q317

  • 5,800

YTD18 YTD17

  • 4,400
  • 6,600
  • 7,500

YTD17 Q317 Q318 YTD18 6,100 6,800 22,900 20,700

+11%

  • 10%

7.1% 5.4%

Key Financial Developments Q3 and 9 months

Continued strong development

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MSEK

3,100

Q3 2017

  • 2,600

Foreign exchange rates

6,200

Volume, sales mix and pricing Licences

1,800

Other Q3 2018

48,300 56,800

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

NET REVENUE WALK q3 2018

Net revenue mainly driven by volume and mix

  • Revenue increased in all main

regions

  • Volume, carline mix and

pricing mainly driven by XC models and S90

  • License sales in 2017 impacts

the net revenue comparison

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MSEK

300

Foreign exchange rates Q3 2017

1,100

  • 2,600

3,700

Volume, sales mix and pricing

1,900

Licences

  • 600

Cost and Other Q3 2018

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

EBIT walk q3 2018

EBIT impacted by a decrease in sold licenses

  • EBIT margin influenced by:
  • product launch costs
  • higher tariffs
  • license sales effects

7.6% EBIT margin 3.2% EBIT margin

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* Change in inventories, accounts receivables and accounts payables, ** Interest, tax and changes in other items, *** Adjusted for exchange on cash

13,600 400

2018 Q2 Liquidity

38,900

2018 Q3 Liquidity

5,100

EBITDA Financing*** 500

31,400

Investments

  • 6,900

Working capital*

13,400 52,900 45,300

Other**

  • 900
  • 4,800

Undrawn credit facilities Marketable securities Cash

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MSEK Free cash flow MSEK -6 600

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

Cash Flow movements Q3 2018

Cash flow Reflecting the Cycle

  • Working Capital development

mainly related to seasonal closing of European factories

  • Investments mainly related to

production ramp up, new car models and technologies

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R&D Expenses (SEKbn)

10.2 5.2% 2015 2014 5.9% 9.7 2016 5.7% 2017 4.9% 4.0% LTM Q3 2018 7.2 9.5 10.2

% of Revenue R&D expenses

Investments (SEKbn)

11.5% 2014 13.6% 8.6 4.7 5.2 4.8 12.7% 15.7% 6.1 9.2 5.5 2015 14.3% 6.4 13.1 15.0 2016 5.4 9.7 17.0 6.0 2017 10.1 LTM Q3 2018 18.6 19.4 25.6 32.7 30.5

Non capitalised R&D % of Revenue Intangible investments Tangible investments

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

Note: Investments impact on cash flow; R&D expenses impact on P&L

Investments and R&D

Investments decrease due to completion of Charleston

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Liquidity 31,400 13,400 500 2,100 22,400 Debt 24,500 45,300 7,400 20,800

Undrawn Credit Facilities Marketable Securities Cash & Cash Equivalents Long-term Debt Short-term Debt

MSEK Net cash position of SEK 7.4bn (Q2 2018 SEK14.4bn)

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

Liquidity & debt

Stable and Positive net cash position

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640 540 420 210

420 420

2018 Sep 30 2021 2020 2018 2019

3,000 2,350 5,160

2022 2023 2024

5,160

2025 2026 45,300 1,970 3,530 7,510 3,420 5,580

Liquidity Loans Bonds

MSEK

13

56% 44% Bonds Loans

Funding by type

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

Balanced Amortisation schedule

balanced and comfortable amortization schedule

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Looking ahead

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

2018 - outlook

Continued strong growth

Strong growth and continued strong profits Upside from renewed product portfolio Strong foundation for our longer term ambitions

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Volvo car group

Longer term ambitions

Direct consumer relationships >5 million Subscription with recurring revenue 50% Pure electric cars 50% Autonomous cars 30% Naturally hedged global production Superior growth Premium OEM profitability

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

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PEOPLE MAKE THE DIFFERENCE

New brand going global (30%) A market leading AD/ADAS SW provider (50%)

Pioneering partnerships Embracing disruption Human-centric

Spearheading electrification My car sometimes Urban focused Fastest growing premium OEM1 Robotaxi

Truly global Strategic affiliates Direct consumer business Wholesale business

(50%)

Synergies

My car always Recurring revenues

Care by VOLVO

Volvo car group

A new structure for the future

VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

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VOLVO CAR GROUP RESULTS PRESENTATION JULY- SEPTEMBER 2018

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