Volvo Group Business Update Post Q2, 2025

Long Term Ambition

The Volvo Group's long-term ambition is to be 100% Safe, Fossil free, and More productive.

Strategic Direction and Financial Ambitions

The Group's strategic direction is aligned with its financial ambitions, focusing on:

• Strategic Direction: Strong positions in key markets with regional value chains, value creation through Group portfolio management, service business growth, synergies across the Group through CAST (Common Architecture and Shared Technology), and leadership in transformation.
• Financial Ambitions: Gradual and consistent earnings improvement, reduced volatility in earnings and cash flow, discipline in capital allocation/investments, continuous investments in offerings, new technologies, and innovations, and accelerating growth through transformation.

Common Architecture and Shared Technology (CAST)

The Common Architecture and Shared Technology (CAST) initiative underpins the Volvo Group's operations, encompassing:

• Trucks
• Buses
• Construction Equipment
• Volvo Penta
• Joint Ventures & Alliances

Driving Global Platforms Supported by CAST

Global platforms are driven by CAST across various brands and business areas, including:

• Brands/Segments: Volvo Trucks, Renault Trucks, Mack Trucks, Volvo Penta, Volvo Buses, Volvo CE, Eicher Trucks, Financial Services.
• Supporting Functions: Manufacturing of Cabs & Trucks, Remanufacturing of Components, Production Logistics, Manufacturing of Components (Engines, Transmissions, Batteries), Service Market Logistics, Volvo Performance System.

Accelerating the Transition with Strong Partnerships

The transition towards sustainable transportation is being accelerated through strong partnerships. The market is shifting from Internal Combustion Engines towards Battery Electric and Fuel Cell Electric vehicles. Key partners in this transition include Proterra, Cellcentric, Cespa, Isuzu, and Eicher.

Value Creation Through Modular Architecture

The Group leverages a modular architecture for value creation. A common vehicle platform supports different powertrains: Combustion engine, Battery electric, and Fuel cell electric. Production occurs in a common plant with pre-assembly stations feeding into a main assembly line, enabling the production of various powertrain configurations.

Formula for Electromobility Adoption

Electromobility adoption is driven by a formula:

? Electromobility adoption rate × ? Product and services offering × ✅ Total cost of ownership (incl. incentives, regulation, carbon targets, pricing) × ? Infrastructure × ?️ Fossil-free energy × ? Supply network = ? Customer competitiveness and peace of mind.

Gradual Backward Integration

The Group is pursuing gradual backward integration in its energy storage systems, progressing from CELL to MODULE, PACK, and finally ENERGY STORAGE SYSTEM. This involves collaborations with partners such as Samsung, LG, Proterra, and Akasol.

Disciplined Capital Allocation and Shareholder Return

Volvo Group demonstrates disciplined capital allocation, balancing shareholder returns with future-proofing the Group. This includes maintaining a strong financial position, investing in technology and innovation, and delivering attractive shareholder returns through dividends. The company shows a strong financial position with increasing net cash and Return on Capital Employed (ROCE).

Consistent Earnings Improvement and Investment in New Technologies

The Group reports consistent earnings improvement while investing in new technologies. Adjusted operating income and net sales have shown positive trends over recent years.

Services Strengthening Business

Volvo Group's service offerings are enhancing customer retention, profitability, and resilience, as indicated by growing service sales.

Shareholder Returns Regardless of Transformation Speed

The Group is structured to generate strong shareholder returns irrespective of the pace of transformation, with potential for significant value generation upside from accelerated transformation.

Market Environment and Forecasts

The report includes market environment analyses and forecasts for Trucks and Construction Equipment across key regions:

• Trucks: Market forecasts are provided for North America, Europe, Brazil, India, and China. Heavy-duty truck market shares are detailed for Europe, North America, Brazil, and Australia, showing Volvo's position relative to competitors like Renault Trucks and Mack Trucks.
• Construction Equipment: Market forecasts are presented for North America, Europe, South America, Asia (excl. China), and China. Product line exposure is compared between the industry (Volvo CE Portfolio) and Volvo Construction Equipment itself.

Product Mix for CO2 Reductions

A diverse mix of products is required to support CO2 reductions towards 2030. This includes Battery Electric, Fuel Cell Electric, and ICE (LNG/Diesel) powertrains for various applications like Refuse, City/Regional distribution, Urban construction, Heavy construction, Interregional haul, Heavy transport, and Long haul, mapped against energy usage and yearly mileage.

Modular Architecture for Diverse Applications

The modular architecture enables a vast number of applications across sectors such as Agriculture, Waste & Recycling, Construction & Mining, Public Service, Construction, Special Cargo & Heavy Haulage, General Cargo & Food, Petroleum & Chemical, and Forest.

Business Portfolio Review

Volvo Group continuously reviews its business portfolio, categorizing product lines, services, market areas, and ventures into 'Develop', 'High frequency follow-ups', and 'Exit' based on operating income and revenue.

Earnings Profile and Market Performance

The Group details its earnings profile across truck brands and joint ventures, showing adjusted operating margins relative to the Group target. Comparisons are made against industry indices and peers:

• Trucks, Buses & Engines: Volvo's adjusted operating margin is compared against Paccar, Daimler, Traton, and Iveco.
• Construction Equipment: Volvo's operating margin is compared against CAT, Komatsu, Deere, Hitachi, and CNH.
• Overall Performance: Volvo Group's operating margin is tracked against its target. Total return is compared against the MSCI World Machinery Index, European truck peers, and US peers (Paccar, Caterpillar).

Autonomous Transportation Platform

Volvo is developing a standard vehicle platform for autonomous transportation to maximize value creation. This platform integrates virtual drivers (e.g., Aurora), truck brands (Volvo, Mack, Renault), business models (Transport as a Service, Truck as a Service), use cases, geographies (US, EU, APAC), and drivetrains (Internal combustion engine, Battery electric, Fuel cell).

Autonomous Solutions Milestones

Volvo Autonomous Solutions has achieved critical milestones, including the unveiling of the Volvo VNL Autonomous, the production of launch fleets, and the start of autonomous operations with safety drivers. The process involves development, testing, validation, and integration.

Strong Credit Ratings

The Volvo Group maintains strong credit ratings from agencies such as S&P, Moody's, and R&I, showing a positive trend over the years.

Disclaimer

This presentation is for informational and background purposes only and does not constitute an offer or solicitation. The information contained herein is based on current circumstances and may include forward-looking statements subject to risks and uncertainties. AB Volvo (publ) is not obligated to update this information.