Volvo Cars initiates $1.9 billion cost-reduction initiative, withdraws financial forecasts amid declining profits.

Mikael Sjoberg | Bloomberg | Getty Images

Swedish-based automaker Volvo Cars announced cost-cutting plans amounting to 18 billion Swedish krona ($1.87 billion) as its operating profit experienced a significant decline in the first three months of the year.

Volvo Cars, which is owned by China’s Geely Holding, reported a first-quarter operating profit of 1.9 billion krona, down from 4.7 billion krona during the same period last year. The margin on earnings before interest and taxes (EBIT) contracted to 2.3% from 5% a year earlier, while revenue fell to 82.9 billion krona in the first quarter, a decrease from 93.9 billion krona in the same period of 2024.

The company indicated that these results reflect a drop in wholesales as part of a planned inventory reduction during the last three months of 2024, adverse currency effects, and broader turbulence within the automotive industry.

Volvo Cars mentioned that its “cost and cash action plan” would entail reductions in investments and redundancies across its global operations. While specific details on potential layoffs were not disclosed, the company promised to provide updates as soon as possible.

Volvo Cars also stated it would no longer be issuing financial guidance for 2025 and 2026.

“There is a rather heavy headwind on the market,” Volvo Cars CEO Håkan Samuelsson told a media outlet in a recent interview. “There is a volume drop, alongside increased price competition, particularly from new entrants in the electric vehicle segment. Additionally, the current turbulence with potential new tariffs complicates future predictions.”

Samuelsson added that the company is focused on controlling its expenses through the cost action package.

In its earnings report, Volvo Cars stated it would refine its U.S. product offerings to concentrate on growth opportunities and examine how it could optimize its existing manufacturing footprint to produce “more cars where they are sold.”

U.S. President Donald Trump recently imposed 25% tariffs on cars imported to the U.S. The White House has also indicated plans to implement tariffs on certain auto parts, such as engines and transmissions, slated to take effect no later than May 3.

Volvo Cars’ share of “electrified cars,” defined as any vehicle with a charging cord, reached 43% in the first quarter. The company aims for this category to account for 90% to 100% of its global sales volume by 2030.