Volvo's Q4 Profits Plunge 68% Amid Trade Headwinds and Market Slump
STOCKHOLM, Feb 5 – Volvo Cars reported a stark 68% drop in its fourth-quarter operating profit on Thursday, as the automaker grapples with a potent mix of geopolitical trade tensions, unfavorable currency shifts, and a cooling global automotive market.
The group's adjusted operating profit fell to 1.8 billion Swedish crowns ($199.9 million) from 5.6 billion crowns a year earlier, while revenues declined by 16%. The company, controlled by China's Zhejiang Geely Holding Group, pointed directly to the impact of retaliatory tariffs between the U.S. and the European Union, a stronger Swedish krona, and the removal of electric vehicle incentives in key markets.
"Our performance was significantly affected by external factors, including the EU-U.S. import tariffs and negative currency effects," said CEO Håkan Samuelsson. "Compounding this, weak demand pressured pricing, and policy changes in the U.S. impacted our sales momentum."
The results fell short of market expectations, according to analysts at J.P. Morgan. A critical metric, the company's gross margin, contracted to 15.8% from 20.4% in the previous quarter, underscoring the direct hit from tariffs.
Trade Policy Takes a Toll
The financial report highlights the lingering impact of recent trade disputes. U.S. import duties on EU-made vehicles, which were initially raised to 27.5% under the previous administration and later negotiated down to a retroactive 15%, have squeezed margins for Volvo, which exports most of its U.S.-bound vehicles from European plants.
Looking ahead, the company stated its turnaround plan remains on track, targeting a return to year-on-year sales growth by 2026. CFO Fredrik Hansson emphasized a focus on cost-saving initiatives and deeper synergies with parent company Geely, particularly on mechanical components, to restore profitability.
In a move reflecting its cautious stance, Volvo Cars' board proposed no dividend for 2025.
Industry Voices React
Klara Svensson, Automotive Analyst at Nordea Markets: "This is a sobering but expected result. Volvo is caught in the crossfire of macro forces beyond its control. Their long-term electrification strategy is sound, but the near-term path is fraught with these external challenges."
Michael Thorpe, Portfolio Manager at Greenwich Capital: "A 68% profit drop is catastrophic for a premium brand. It raises serious questions about their operational resilience and pricing power. The 'wait until 2026' narrative feels like a hope, not a strategy."
Li Wei, Managing Director at Shanghai Automotive Insight: "The Geely-Volvo synergy story is still in its early chapters. This quarter's pain underscores why accelerating joint platform development and supply chain integration is not just beneficial but essential for survival in this climate."
Emma Johansson, Former Volvo Engineer & EV Advocate: "It's infuriating. While they blame tariffs—which are real—this also exposes over-reliance on fossil fuel SUV sales in certain markets. The transition to pure electric needs to be faster, not just in words but in volume and model rollout."