Volvo Cars reported a significant decline in its first-quarter 2025 financial performance, with operating income (EBIT) falling to SEK 1.9 billion, a 60% decrease compared to the same period in 2024. This downturn reflects challenges such as reduced wholesale volumes, adverse currency effects, and the impact of global trade tensions, particularly the 25% U.S. import tariff on European vehicles.
In response to these financial pressures, Volvo Cars has announced an SEK 18 billion ($1.9 billion) cost and cash action plan. The initiative includes SEK 3 billion in variable cost reductions, SEK 5 billion in indirect spending efficiencies, and SEK 10 billion in cash actions aimed at reducing working capital and capital expenditures during 2025 and 2026. The majority of the effects from this plan are expected to be realized in 2026.
The company has also undertaken a strategic restructuring of its operations in the U.S., creating a new region encompassing the U.S., Canada, and Latin America. This move aims to optimize production and better align the product lineup with market demands. Additionally, Volvo Cars is focusing on adapting its operations in China to respond more swiftly to the rapidly changing automotive sector and customer preferences.
Despite the challenges, Volvo Cars continues its commitment to electrification. In the first quarter, 43% of all vehicles sold were electrified, with nearly 19% being fully electric. The company recently launched its next fully electric, software-defined car, the ES90, as part of its strategy to lead in the growing electric vehicle market.
However, the company has withdrawn its financial guidance for 2025 and 2026 due to the uncertainties surrounding macroeconomic conditions, geopolitical developments, and market dynamics. Volvo Cars emphasizes the need to adapt to a more regionalized world, tailoring its approach to meet the specific needs of different markets.
Looking ahead, Volvo Cars remains focused on strengthening its position in the electric vehicle sector and improving profitability through cost efficiencies and strategic regional adaptations. The success of these initiatives will be crucial in navigating the current industry challenges and achieving sustainable growth.
