Finance
Volvo Cars fourth-quarter profits tumble on tariff hit, challenging market
Published by Global Banking & Finance Review®
Posted on February 5, 2026
2 min readLast updated: February 5, 2026
Quick Summary
Volvo Cars reported a drop in Q4 operating profit, citing trade tariffs, weak demand, and the removal of US electric vehicle incentives.
Volvo Cars Reports 68% Drop in Q4 Profits Due to Tariffs and Demand
Volvo Cars' Financial Challenges
Feb 5 (Reuters) - Volvo Cars' fourth-quarter profit fell 68%, hit by tariffs and weak demand, as the Sweden-based automaker warned on Thursday that external factors continued to pose challenges.
Impact of Tariffs on Profit
Operating profit excluding items affecting comparability at the group, which is majority-owned by China's Geely Holding, fell to 1.8 billion crowns ($199.9 million) from 5.6 billion crowns a year earlier on a 16% sales drop.
Weak Demand and Revenue Effects
"External factors (affected) our performance, such as EU-U.S. import tariffs and the negative currency effect of a stronger Swedish krona," CEO Hakan Samuelsson said in a statement.
Future Growth Plans
"On top of that, revenues were affected by weak demand putting pressure on pricing, and the removal of EV incentives in the U.S., which negatively impacted sales."
Analysts at J.P. Morgan said in a note to clients that both profits and sales lagged market expectations.
VOLVO'S TRUMP TARIFF HIT
U.S. President Donald Trump initially hiked import tariffs on cars from the European Union to 27.5% from 2.5% as part of his push last year to reset Washington's global trade relations.
That rate was later reduced to 15%, applied retroactively to August 1, following trade negotiations.
Volvo Cars exports the majority of its U.S.-bound cars from Europe. The company's gross margin - a metric monitored by analysts to assess the impact of tariffs - was 15.8%, against 20.4% in the third quarter and 17.1% a year earlier.
Volvo Cars said it aimed to return to year-on-year volume growth in 2026, and that an ongoing turnaround plan was on track.
"We have a long list of cost savings ideas, which we are yet to execute," Chief Financial Officer Fredrik Hansson told Reuters.
"We also see that in terms of synergies and collaborations with Geely to reduce costs, especially on mechanical components, we've only started to scratch the surface," he added.
The company proposed no dividend for 2025.
($1 = 9.0039 Swedish crowns)
(Reporting by Alessandro Parodi, additional reporting by Marie Mannes; Editing by Anna Ringstrom and Joe Bavier)
Key Takeaways
- •Volvo Cars' Q4 profit fell due to external factors.
- •Trade tariffs significantly impacted profits.
- •Weak demand contributed to financial decline.
- •Price pressure affected overall performance.
- •Removal of US electric vehicle incentives was a factor.
Frequently Asked Questions about Volvo Cars fourth-quarter profits tumble on tariff hit, challenging market
1What is operating profit?
Operating profit is the income generated from normal business operations, excluding expenses associated with non-operational activities like taxes and interest. It reflects the efficiency of a company's core business activities.
2What is demand?
Demand refers to the consumer's desire and willingness to purchase goods or services at a given price. It plays a crucial role in determining the market dynamics and pricing strategies.
3What is price pressure?
Price pressure occurs when competition or market conditions force businesses to lower their prices. This can impact profit margins and overall profitability, especially in industries with tight competition.
