U.S. tariffs hit profits, Volvo reports its first loss since IPO in Q2

Affected by U.S. tariffs and high restructuring costs, Volvo Cars has reported its first quarterly loss since going public in 2021.

Volvo Cars' financial report released on Thursday showed that the company recorded an operating loss of 10 billion Swedish Krona in the second quarter of this year. This figure fell far short of market expectations, as analysts surveyed by S&P Capital IQ had generally anticipated a profit of 2.3 billion Swedish Krona. The key factor leading to the loss was a one-time non-cash impairment charge of up to 11.4 billion Swedish Krona.

Due to core operating profit exceeding analyst expectations after excluding one-time items, Volvo Cars' stock price initially surged by 10%, before the gain retreated to 0.037%. CEO Håkan Samuelsson emphasized that Volvo "will absolutely not" exit the U.S. market, where it has been established for 70 years, but tariffs are forcing significant adjustments to its product and production strategies.

In response, Volvo announced a key initiative: it plans to start producing its best-selling XC60 SUV model at its plant in South Carolina from the end of 2026. This move aims to avoid high import tariffs through localized production, directly addressing current trade challenges.

Financial Report Details: Huge Impairment Leads to Loss, Core Profit Exceeds Expectations

The financial report data showed that Volvo Cars' revenue in the second quarter fell by 8% year-on-year to 93.5 billion Swedish Krona, primarily due to a decline in retail sales in markets such as Europe.

The direct cause of the quarterly loss was a one-time expense of up to 11.4 billion Swedish Krona. Earlier this week, Volvo had warned that due to a 25% tariff on foreign-manufactured cars in the U.S., the company was unable to sell the lucrative new ES90 model in the U.S. market, resulting in this expense. Overall, the operating loss for the quarter reached 10 billion Swedish Krona.

However, excluding special items, Volvo Cars' operating profit was 2.9 billion Swedish Krona, which, although significantly down from 8 billion Krona in the same period last year, still exceeded market expectations. Analysts at JP Morgan noted in a report that despite pessimistic sentiment, Volvo's second-quarter data was better than expected. Bernstein analyst Harry Martin also mentioned that the carbon emission credits sold by the company in the second quarter even surpassed the total for the entire year of 2024, providing support for core profitability.

Under Tariff Pressure, Volvo Adjusts U.S. Market Strategy

Volvo is widely regarded as one of the European automakers most severely affected by U.S. tariffs. According to media reports, Volvo has begun to withdraw sedans and station wagons from its U.S. product line, partly due to waning market interest and also due to the direct impact of tariffs. In this regard, CEO Håkan Samuelsson stated in an interview that the company is actively adjusting its strategy to meet the challenges:

"What we need to do first is to fill our factory in South Carolina. It should become the strategic asset we envision, so we must utilize it better. Secondly, it is a very natural choice to introduce a best-selling model for local production against the backdrop of tariffs. We are introducing the XC60 SUV."

Volvo's performance is a barometer for the challenges facing the entire automotive industry. Analysts expect the automotive sector to face a challenging earnings season due to the ripple effects of Trump's tariffs.

"The macroeconomic environment, tariff-related uncertainties, and increasingly fierce competition are all putting pressure on market demand," Samuelsson stated in a release:

"All these factors are not only bringing sustained sales and profit pressure to us but also to the entire automotive industry."

In addition to the deteriorating external environment, Volvo itself is also facing some difficulties. The delay in the launch of the company's flagship model, the EX90 SUV, and software issues have posed challenges to its business. To cope with the worsening business environment, Volvo has announced a global layoff of 3,000 employees to cut costs and actively seek self-rescue