S&P: Volvo Car hit hard by tariffs in second quarter

S&P: Volvo Car hit hard by tariffs in second quarter

Volvo Cars reported a significant decline in its second-quarter operating profit, highlighting the challenges posed by tariffs and softening demand. Despite exceeding analyst expectations, the company's results underscore the ongoing headwinds in the automotive sector [1].

The Swedish automaker, owned by China's Geely Holding, faced a 27.5% tariff on European-made cars entering the U.S. and a 25% tariff on auto parts, steel, and aluminum. These tariffs, coupled with a 10% tariff imposed by the European Union on American-made cars, have severely impacted Volvo's profitability and sales [2].

Volvo's second-quarter operating profit, excluding one-off items, fell to 2.9 billion Swedish crowns ($297.89 million), a substantial drop from the 8.0 billion crowns reported in the same period last year. The company's gross margin also decreased to 13.5% from 18.2% in the first quarter, though it stood at 17.7% when adjusted for one-offs [3].

The company announced an impairment charge of $1.2 billion related to model launch delays and tariffs, leading to an operating loss of 10 billion crowns compared to a profit of 8 billion crowns in the same quarter last year. Despite these challenges, Volvo's shares rose nearly 8% following the announcement [4].

Volvo's CEO, Hakan Samuelsson, who was brought back in April to turn around the company, has implemented a cost-cutting program and slowed down investments. He has also urged the European Union to reduce its tariffs on American-made cars, arguing that European automakers do not need protection from U.S. competitors [5].

The company's retail sales plunged 12% to 181,600 vehicles in the second quarter, with tariffs and past development setbacks weighing on profitability and sales of its battery-powered models, the EX90 sport utility vehicle and ES90 sedan [2].

Volvo's second-quarter results highlight the broader challenges facing the automotive industry, including subdued demand for electric vehicles, intensifying competition from Chinese manufacturers, and ongoing trade tensions. The company's ability to navigate these challenges will be crucial for its future performance.

References:
[1] https://finance.yahoo.com/news/volvo-cars-q2-operating-profit-050800734.html
[2] https://www.businesstimes.com.sg/companies-markets/transport-logistics/volvo-car-posts-us1-billion-loss-over-impairment-tariffs
[3] https://www.reuters.com/world/china/volvo-cars-quarterly-operating-profit-beats-expectations-despite-tariff-hit-2025-07-17/
[4] https://www.reuters.com/world/china/volvo-cars-q2-operating-profit-falls-tariffs-bite-2025-07-17/
[5] https://www.reuters.com/business/autos-transportation/volvo-ceo-wants-eu-cut-unnecessary-auto-tariffs-defuse-trump-threat-2025-07-17/