Mikael Sjoberg | Bloomberg | Getty Images
Swedish-based automaker Volvo Cars on Tuesday announced cost-cutting plans of 18 billion Swedish krona ($1.87 billion) and withdrew financial guidance as its operating profit fell sharply in the first three months of the year.
Volvo Cars, which is owned by China’s Geely Holding, reported first-quarter operating profit of 1.9 billion krona, down from 4.7 billion krona in the same period last year.
Its margin on earnings before interest and taxes (EBIT) narrowed to 2.3% from 5% a year earlier, while revenue fell to 82.9 billion krona in the first quarter, down from 93.9 billion krona in the same period of 2024.
The company said the results reflect a drop in wholesales as part of a planned inventory reduction during the final three months of 2024, adverse currency effects and broader automotive industry turbulence.
Volvo Cars said its so-called “cost and cash action plan” would include reductions in investments and redundancies at its operations across the globe. The company did not provide further information on the potential scale of the layoffs but said it would update with “more details as soon as possible.”
Volvo Cars said it is no longer providing financial guidance for both 2025 and 2026, citing tariff pressure on the automotive sector.
“There is a rather heavy headwind on the market,” Volvo Cars CEO Håkan Samuelsson told CNBC’s “Europe Early Edition” in a Tuesday interview.
“There is a volume drop, and on top of that also price competition, new players in the electric segment, especially, but also influencing the prices generally. And on top of that you have the turbulence now with additional tariffs, so all of that makes it very difficult to predict the future.”
Samuelsson added that the company was focusing on what it can control via the cost action package.
Shares of Volvo Cars fell as much as 10% on Tuesday, before paring some of its losses. The firm was last seen trading 8.8% lower.
Volvo Cars CEO calls for a U.S. trade deal
In its earnings report, the company said it would sharpen its U.S. product line-up to focus on growth and explore how it could “better use” its existing manufacturing footprint in the coming years, in order to produce “more cars where they are sold.”
U.S. President Donald Trump imposed 25% tariffs on cars imported to the U.S. earlier this month. The White House has said it also plans to place tariffs on some auto parts such as engines and transmissions, which are set to take effect no later than May 3.
“We see long-term, we need, of course, to come back to some kind of trade deal with the U.S. Otherwise, this is of course going to be very difficult for the business in the U.S.,” Samuelsson said.
Alongside making more cars locally, Samuelsson said the automaker is exploring how it can utitilize its South Carolina factory more effectively.
“We are looking into utilizing our Charleston factory better. So, we need another car into that factory and that has to be a best-seller for the U.S. market. It’s something that we otherwise need to import and pay tariffs for. So, that’s really the countermeasures we are taking,” Samuelsson said.
Volvo Cars’ sales share of “electrified cars,” which it defines as any vehicle with a charging cord, hit 43% in the first quarter. It aims for the category to represent 90% to 100% of its global sales volume by 2030.