Volvo Cars Cuts 2025-2026 Guidance Amid 59% Q1 Profit Drop

Volvo Cars, headquartered in Sweden, announced a cost-cutting plan worth 180 billion Swedish kronor (approximately 18.7 billion USD) and withdrew its financial performance guidance. This decision comes after the company reported a significant decline in operating profit for the first three months of the year.

The automaker, owned by China's Geely Holding Group, reported that its operating profit for the first quarter was 19 billion kronor, down from 47 billion kronor in the same period last year. The company's earnings before interest and taxes (EBIT) margin narrowed from 5% to 2.3%, while first-quarter revenue decreased from 93.9 billion kronor to 82.9 billion kronor.

Volvo attributed this performance to a planned reduction in inventory in the last three months of 2024, unfavorable exchange rate impacts, and broader industry turbulence in the automotive sector. The company's "cost and cash action plan" includes reducing investments and global workforce reductions. While specific details on the scale of potential layoffs were not provided, Volvo stated that more information would be forthcoming.

Due to the tariff pressures facing the automotive industry, Volvo Cars has decided not to provide financial guidance for 2025 and 2026. "The market is facing quite strong headwinds," said Volvo Cars CEO Håkan Samuelsson. He highlighted the challenges posed by declining sales, price competition, and the entry of new players in the electric vehicle segment, as well as additional disruptions from tariffs, making future predictions difficult.

Samuelsson added that the company is focusing on controlling what it can through its cost action plan. In its financial report, Volvo mentioned plans to adjust its U.S. product line, focusing on growth and exploring ways to better utilize its existing manufacturing infrastructure to produce more cars in sales regions. Volvo Cars' sales of "electrified vehicles" (defined as any vehicle with a charging cable) reached 43% in the first quarter. The company aims for this category to account for 90% to 100% of its global sales by 2030.