Volvo profit tumbles 68% on weak demand

CFO cites tough markets in China and US after EV tax cuts

GDANSK:

Sweden-based Volvo Cars on Thursday reported a 68% dive in fourth-quarter profit as it adjusted prices in response to weak demand, putting its shares on track for their biggest daily fall on record.

Volvo Cars, the first European carmaker to report fourth-quarter results, forecast year-on-year volume growth in 2026 but braced for what it termed a "persistently tough external environment".

Operating profit before one-off items at the group majority-owned by China's Geely Holding fell to 1.8 billion crowns ($199.9 million) from 5.6 billion a year earlier, hit by US import tariffs, a weak dollar and low demand.

"We do see pricing being a big element in Q4," Chief Financial Officer Fredrik Hansson told analysts and media in a call, highlighting tough market conditions in China and the US after the country ended tax incentives for EVs.

Handelsbanken analyst Hampus Engellau said incentive-driven sales and price discounts had hurt the company's profits more than the market had expected. JPMorgan analysts said in a note both profits and sales, down 16% in the quarter, had lagged market expectations.

Trump tariff hit

US President Donald Trump initially hiked import tariffs on cars from the EU to 27.5% from 2.5% during last year's push to reset Washington's global trade relations. That was later reduced to 15%, applied retroactively to August 1.

Volvo Cars' gross margin - a metric monitored by analysts to assess the impact of tariffs was 15.8%, against 20.4% in the third quarter and 17.1% a year earlier.

Samuelsson told analysts and media that, following a fairly big hit from US tariffs in the fourth quarter, he saw more opportunities in 2026 to mitigate tariff-related costs.

Volvo Cars also said an ongoing turnaround plan was on track. The group cut 3,000 jobs last year, pulled guidance and slowed investments to offset pressure from US tariffs, fierce competition and an EV market slowdown.