Introduction

Swedish automaker Volvo, owned by China’s Geely Group, announced on Tuesday (April 29) a significant cost-cutting program worth approximately $1.87 billion, following a sharp decline in first-quarter profits. The company also decided to suspend financial forecasts for 2025 and 2026 — a move that underscores the heightened uncertainty across the automotive industry.

Decline in Profitability and Market Pressures

In the first quarter of 2025, Volvo reported an operating profit of 1.9 billion Swedish kronor, a steep drop compared to 4.7 billion kronor during the same period last year. The operating margin (EBIT) contracted to just 2.3%, compared to 5% a year ago. Revenues also weakened, totaling 82.9 billion kronor versus 93.9 billion kronor in Q1 2024.

The company cited several factors behind the disappointing results, including a deliberate reduction of wholesale volumes at the end of 2024, adverse currency effects, and broader industry turmoil.

The “Cost and Cash Action Plan”

In an effort to stabilize operations, Volvo launched a broad cost-cutting initiative that includes:

• Reducing future investment plans
• Workforce reductions across global facilities

The company has yet to provide exact figures regarding layoffs but pledged to issue an update shortly.

Additionally, Volvo announced it will no longer issue forward-looking financial guidance, reflecting the deep uncertainty stemming from price volatility, intensifying competition in the electric vehicle (EV) sector, and new U.S. tariffs.

Geopolitical Impacts and Executive Commentary

Volvo CEO Håkan Samuelsson addressed the challenges in an interview with CNBC:
“There are heavy pressures from the market — declining demand, aggressive price competition from new EV players, and additional tariffs. All of these factors create an environment where forecasting the year ahead has become extremely difficult.”

Samuelsson emphasized that the company’s immediate focus is on controlling what it can: operational efficiency and reinforcing its position in key markets such as the United States.

Strategic Adjustments in the U.S. Market

In its report, Volvo noted plans to refine its U.S. product lineup and pledged to “manufacture more vehicles where they are sold.”
This strategic shift is aimed at mitigating the impact of the latest round of tariffs introduced by President Trump’s administration — a 25% levy on imported vehicles, along with expanded tariffs on components like engines and transmissions effective May 3.

EV Focus Remains a Priority

Despite current headwinds, electrification remains central to Volvo’s long-term strategy. In the first quarter, sales of fully electric and plug-in hybrid vehicles accounted for 43% of total deliveries. The company reaffirmed its goal of reaching 90%–100% electrified sales globally by 2030.

Conclusion

Volvo, one of Europe’s leading automakers, is grappling with a complex landscape shaped by economic, regulatory, and geopolitical pressures. While its cost-cutting measures are a necessary response to these evolving challenges, the critical question remains: can Volvo sustain its position and return to growth in the near future?