Volvo Cars today reports a group operating income (EBIT) of SEK 1.9 billion for the first quarter of 2025, following a drop in wholesales as part of a planned inventory reduction during Q4 last year, as well as adverse currency effects. The result also reflects the current global turbulence and a challenging external environment for the automotive industry.
To protect profitability and drive structural efficiencies on direct and indirect costs, as well as help to offset external headwinds, the company has launched an accelerated cost and cash action plan totalling SEK 18 billion. The majority of the effects from this plan will be realised in 2026.
The plan includes SEK 3 billion in variable cost actions and SEK 5 billion in indirect spend efficiencies, with half of the latter expected to impact EBIT already in 2026. Furthermore, SEK 10 billion will be allocated through additional cash actions to reduce working capital and capital expenditures in 2025 and 2026.
The reductions in investments are in addition to the already planned lower investments in the future, as previously communicated. As part of the action plan, redundancies will be implemented at its operations worldwide, and the company will provide more details as soon as possible.
Volvo Cars remains firm on its ambition of becoming a fully electric car company. The fully electric market segment is the fastest-growing, and Volvo Cars is a leader in this transition. Forty-three per cent of all Volvo cars sold in the first quarter were electrified, meaning they were either fully electric or plug-in hybrid, with almost a fifth of sales being fully electric. During the first quarter, Volvo Cars also launched its next fully electric software-defined car, the ES90.
As Volvo Cars accelerates towards full electrification, its premium plug-in hybrids offer a pragmatic bridge for customers who are not yet ready to make the switch.
Volvo Cars also sees a need to adapt to a more regionalised world. This includes a more focused approach for each region in terms of product, technology, manufacturing and commercial. The company will empower its regions to meet the needs of its customers better, ensuring they are resilient and well-positioned for growth.
The company will initially focus on the US and Chinese markets as its priorities. In China, the company will adapt more quickly to the rapidly changing automotive sector and evolving customer demands, and is considering giving larger operational responsibilities to the market. Volvo Cars will soon reveal its first extended range plug-in hybrid in China – a good example of its ability to tailor products to different demands in different markets.
Volvo Cars is also undertaking a strategic restructuring of its operations in the US, creating a new region called Americas. This region encompasses the US, Canada, and Latin American markets and will be led by Luis Rezende.
At the same time, Mike Cottone will be leaving Volvo Cars, and the company wishes to thank him for his nearly 20 years of service. The restructuring further simplifies the company’s global operations into three streamlined regions: the Americas, Greater China, Europe and the Rest of the World.
In the US, the company will refine its product lineup to support growth and optimise the use of its existing manufacturing footprint in the coming years, producing more cars where they are sold. Earlier this month, Volvo Cars started production of the critical EX30 at its Ghent factory in Belgium.
Q1 Results Breakdown
The current turbulence in the broader world economy is reflected in the company’s financial results for the first quarter. In terms of retail sales, the company sold 172,219 cars in the first quarter, representing a 6% decline compared to the same period in 2024.
The result was also affected by currency effects and a 19 per cent drop in wholesale volumes after Volvo Cars lowered its inventories in Q4 last year. Revenues fell by 12 per cent to SEK 82.9 billion. The core EBIT of SEK 1.9 billion translated into a core operating profit margin of 2.3%.
At the same time, despite the drop in wholesales, the company improved its free cash flow, supported by improvements in working capital as well as the sale of its stake in Lynk & Co. Volvo Cars also continued its path towards electrification and its fully electric sales share of 19 per cent in Q1 remained the highest among its premium legacy competitors.
Looking Ahead
2025 will be a challenging and transitional year, given the uncertainties surrounding macroeconomic, geopolitical, and market developments. As Volvo Cars enters the new year, it observes that more challenging market conditions, combined with lower volumes and increased price pressure, are impacting profitability.
The company’s long-term strategy, foundations for growth, and path to improved profitability remain intact, and an accelerated cost and cash action plan has also been launched to protect these elements further. But given external developments and increased uncertainties, Volvo Cars is no longer providing financial guidance for 2025 and 2026.
In recent years, Volvo Cars has made significant progress in electrification, becoming one of the fastest-growing premium car companies in the world. The company aims to continue in that direction with the right cars, a competitive cost base and increased resilience. It will continue to build a stronger, more efficient and more valuable Volvo Cars.