Volvo Cars Shares Sink After Sharp Decline in Quarterly Profit

Shares of Volvo Cars fell sharply in Stockholm on Thursday, dropping as much as 19% in early trading after the Swedish automaker reported a steep decline in fourth-quarter earnings. The plunge put the company on course for its worst single-day performance since its market debut in 2021.

The manufacturer, majority-owned by China’s Zhejiang Geely Holding Group, said operating income excluding items affecting comparability slid 68% year on year to 1.8 billion Swedish krona (about $200 million). Management attributed the erosion in profitability to newly implemented U.S. tariffs on European goods, unfavorable foreign-exchange movements and softer demand for premium vehicles in several key regions, especially China.

Volvo’s announcement arrives during a period of heightened trade friction between the United States and the European Union. In July of last year, the two sides reached a framework accord that introduced a blanket 15% tariff on most EU exports to the U.S., replacing a higher rate that had been threatened earlier by Washington. Although the final figure nearly halved the 27.5% duty previously applied to Europe’s automotive sector, industry groups have warned that the new charges will still raise costs across supply chains. The European Automobile Manufacturers’ Association, for example, has argued that additional expenses could reduce the competitiveness of EU-produced vehicles in North America. The full text of the trade agreement is available from the Office of the United States Trade Representative.

Because Volvo exports a significant share of its models to the U.S. market, analysts have long viewed the company as one of the European carmakers most exposed to American tariff actions. Management said the recently imposed levies, combined with the expiration of electric-vehicle purchase incentives in both the U.S. and China, weighed heavily on fourth-quarter performance. Currency swings, particularly the relative strength of the U.S. dollar against the Swedish krona, further eroded margins by increasing the cost of imported components.

Chief Executive Håkan Samuelsson acknowledged that market conditions remain difficult, citing intense competition in China and waning consumer sentiment in several regions. Even so, he pointed to internal cost-containment measures and positive free-cash-flow generation as indications that the company has taken steps to preserve financial flexibility. Volvo implemented a series of efficiency programs throughout 2024, targeting procurement, logistics and overhead expenses, and said those initiatives are continuing this year.

Volvo’s fourth-quarter results cap a year of mixed fortunes for the manufacturer. While deliveries of the fully electric EX30 small crossover began in Europe, overall sales volumes were held back by component shortages, particularly in semiconductors and battery cells. Those constraints eased toward the end of the year, but management said demand for premium electric vehicles moderated as government incentives were scaled back in several large markets.

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Looking ahead, the company expects continued pressure on pricing and margins in 2026. Deliveries of the new EX60 mid-size sport-utility vehicle, a battery-electric model positioned above the EX30, are scheduled to ramp up in the second half of next year. Volvo said the launch timetable remains on track, with production lines in Ghent, Belgium, already undergoing retooling to accommodate the model. The Ghent plant, which currently assembles the XC40 Recharge and will soon build the new EX30 for European customers, is central to Volvo’s strategy of transitioning to a fully electric lineup by 2030.

Despite the planned product introductions, management cautioned that several external factors could weigh on performance over the next 12 months. In addition to tariffs and exchange-rate volatility, the company cited lingering regulatory uncertainty in multiple regions, including evolving emissions standards and potential revisions to battery-sourcing requirements. Consumer confidence, particularly in discretionary categories such as premium automobiles, also remains fragile against a backdrop of slowing global growth.

At 11:30 a.m. local time, Volvo shares were down about 18%, trimming some of the initial slide but still on pace to eclipse the 11.2% decline recorded in March 2023, the firm’s previous worst trading day. The broader OMX Stockholm 30 index was marginally lower.

Crédito da imagem: Nicolas Tucat | AFP | Getty Images