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Volvo Cars says the worst of the chip crisis that has hampered the industry’s post-pandemic recovery may be over, although it has warned of rising prices due to falling raw material costs.

The Swedish carmaker expects semiconductor shortages to continue through the first half of the year but believes the impact on production is fading. The Gothenburg-based group on Friday posted a record full-year profit of 14.2 billion SKr (£1.1 billion) from sales of SKr699 billion.

Chief executive officer Hakan Samuelsson told the Financial Times: “I don’t think we will see a trend getting worse.

He added: “Supply chain was an issue in the fourth quarter, but in terms of manufacturing the situation was worse in the third quarter. “We are on the way to improving,” he added, but stopped short of predicting the problem would be fully resolved in the second half.

Shares of Volvo Cars fell more than 4% in early Stockholm trading on Friday.

Fourth-quarter profit fell 60% to SKr 2.3 billion year-on-year, as chip shortages caused production to resume and Volvo’s Polestar business incurring accounting fees.

Even if the chip shortage improves, the company will face higher raw material costs, leading to an increase in prices.

“We are increasing prices more than usual,” said chief financial officer Björn Annwall.

The business, which listed last year, said Samuelsson would retire next month. Former Dyson CEO Jim Rowan will replace him.

The all-electric car market share grew to 6% in the fourth quarter, with production expected to grow by an average of around 10% next year. The company has pledged to only sell electric models by 2030.

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