Mikael Sjoberg | Bloomberg | Getty images
Volvo Cars -based Volvo Cars manufacturer in Sweden announced on Tuesday cost reduction plans of 18 billion Swedish Krona ($ 1.87 billion) and withdrew the financial orientation as their operational profits fell sharply in the first three months of the year.
Volvo Cars, owned by Geely Holding in China, reported an operational gain of the first quarter of 1.9 billion Krona, below 4.7 billion Krona in the same period last year.
Its margin on profits before interest and taxes (EBIT) was reduced to 2.3% of 5% of the previous year, while revenues fell to 82.9 billion Krona in the first quarter, below 93.9 billion Krona in the same period of 2024.
The company said that the results reflect a fall in whlesal as part of a planned inventory reduction during the last three months of 2024, adverse currency effects and turbulence of the broader automotive industry.
Volvo Cars said that his so -called “Cost and Effective Action Plan” would include reductions in investments and redundancies in its operations worldwide. The company did not provide more information about the potential scale of layoffs, but said it would be updated with “more details as soon as possible.”
Volvo Cars said that he no longer provides financial orientation for both 2025 and 2026, citing tariff pressure in the automotive sector.
“There is a wind against quite heavy in the market,” said the CEO of Volvo Cars, Håkan Samuelsson, “Europe Early Edition” of CNBC in a Tuesday’s interview.
“There is a volume drop, and in addition to that also the price competition, the new players in the electrical segment, especially, but also influence prices in general. And it also has the turbulence now with additional tariffs, so that all that makes it very difficult to predict the future.”
Samuelsson added that the company was focusing on what it can control through the cost action pack.
Volvo Cars’ shares fell up to 10% on Tuesday, before reducing some of their losses. The company was last seen that it quoted 8.8% lower.
Volvo Cars CEO asks for an American commercial agreement
In its profit report, the company said it would sharpen its line of American products to focus on growth and explore how it could “better use” its existing manufacturing footprint in the coming years, to produce “more cars where they are sold.”
The president of the United States, Donald Trump, imposed 25% tariffs on imported cars to the United States earlier this month. The White House has said that it also plans to place tariffs in some automatic parts, such as engines and transmissions, which arise in effect no later than May 3.
“We see in the long term, we need, of course, to return to some kind of commercial agreement with the US. Otherwise, this, of course, will be very difficult for the business in the United States,” said Samuelsson.
In addition to making more locally cars, Samuelsson said the car manufacturer is exploring how he can use his South Carolina factory more effectively.
“We are looking to use our Charleston factory better. Therefore, we need another car in that factory and that has to be a best-seller for the US market. It is something that we otherwise need to import and pay tariffs. So those are really the countermeasures we are taking,” said Samuelsson.
The participation of Volvo Cars sales of “electrified cars”, which defines like any vehicle with a cargo cable, reached 43% in the first quarter. Its objective is that the category represents 90% to 100% of its global sales volume by 2030.
