Sweden-based Volvo Cars reported a sharp 68% plunge in fourth-quarter profit on Thursday and warned of a persistently challenging external environment, sending its shares toward their steepest one-day decline on record.
Operating profit before one-off items fell to 1.8 billion Swedish crowns ($199.9 million), down from 5.6 billion crowns a year earlier. The automaker, which is majority owned by Geely Holding, exports most of its U.S.-bound vehicles from Europe.
Chief Executive Håkan Samuelsson said results were hurt by a combination of external pressures, including EU–U.S. import tariffs and the negative currency impact of a stronger Swedish krona. He added that weaker demand squeezed pricing, while the removal of electric-vehicle incentives in the United States weighed on sales. Overall vehicle sales fell 16% during the quarter.
Analysts at JPMorgan said both profits and revenues missed market expectations. Volvo Cars shares dropped as much as 16% in early trading, extending a three-month decline to roughly 26%.
Tariffs pressure margins, outlook remains cautious
The profit warning underscores the impact of U.S. trade policy. President Donald Trump previously raised import tariffs on EU-made cars to 27.5% from 2.5% as part of a broader effort to reshape U.S. trade relations, before later reducing the rate to 15%, applied retroactively from August 1.
Volvo Cars’ gross margin—a key indicator of tariff pressure—slipped to 15.8%, down from 20.4% in the third quarter and 17.1% a year earlier. Samuelsson said the fourth quarter took a significant hit from tariffs but added that the company sees more opportunities in 2026 to offset related costs.
Looking ahead, Volvo Cars said it aims to return to year-on-year volume growth in 2026 and reiterated that its turnaround plan remains on track. In the near term, management will focus on improving efficiency and lowering the cost base to navigate the difficult operating backdrop.
Chief Financial Officer Fredrik Hansson said the company has a long pipeline of cost-saving initiatives yet to be implemented and highlighted untapped synergies with Geely, particularly in mechanical components. Volvo Cars also confirmed it will not propose a dividend for 2025.
