Volvo Cars Q4 profits tumble on tariff hit, challenging market

[STOCKHOLM] Volvo Cars’ fourth-quarter profit fell by 68 per cent, hit by tariffs and weak demand, as the Sweden-based automaker warned on Thursday (Feb 5) that external factors continued to pose challenges.

Operating profit excluding items affecting comparability at the group, which is majority-owned by China’s Geely, fell to 1.8 billion Swedish kronor (S$254.7 million) from 5.6 billion Swedish kronor the same year-ago period on a 16 per cent sales drop.

“External factors (affected) our performance, such as the European Union-US import tariffs and the negative currency effect of a stronger Swedish crown,” CEO Hakan Samuelsson said.

“On top of that, revenues were affected by weak demand putting pressure on pricing, and the removal of electric-vehicle incentives in the US, which negatively affected sales.”

Analysts at JP Morgan said in a note to clients that both profits and sales lagged market expectations.

Volvo’s Trump tariff hit

US President Donald Trump initially hiked import tariffs on cars from the EU from 2.5 to 27.5 per cent, as part of his push in 2025 to reset Washington’s global trade relations.

That rate was later reduced to 15 per cent, applied retroactively on Aug 1, following trade negotiations.

Volvo Cars exports the majority of its US-bound cars from Europe.

The company’s gross margin – a metric monitored by analysts to assess the impact of tariffs – was 15.8 per cent, against 20.4 per cent in the third quarter and 17.1 per cent in the same year-ago period.

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Volvo Cars said it aimed to return to year-on-year volume growth in 2026, and that an ongoing turnaround plan was on track.

“We have a long list of cost-saving ideas, which we are yet to execute,” chief financial officer Fredrik Hansson told Reuters.

“We also see that in terms of synergies and collaborations with Geely to reduce costs, especially on mechanical components, we’ve only started to scratch the surface,” he added.

The company did not propose a dividend for 2025. REUTERS