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Volvo Cars Unveils Cost-Cutting Measures Amidst Declining Profits
Volvo Cars, the Swedish automaker owned by China’s Geely Holding, has revealed a significant cost-reduction plan totaling 18 billion Swedish krona (approximately $1.87 billion) following a notable decline in its operating profit for the first quarter of the year.
In its recent financial statement, Volvo Cars reported an operating profit of 1.9 billion krona, a significant decrease from 4.7 billion krona during the same timeframe last year. The company’s profit margin on earnings before interest and taxes (EBIT) plummeted to 2.3%, down from 5% a year earlier. Additionally, revenue dropped to 82.9 billion krona from 93.9 billion krona in early 2024.
The decline was attributed to a reduction in wholesales as part of a strategic inventory reduction, unfavorable currency fluctuations, and the overall volatility plaguing the automotive sector.
In response to these challenges, Volvo Cars announced that its “cost and cash action plan” would encompass cuts in investments and a reduction in workforce across its global operations. While specifics regarding potential layoffs were not detailed, the company promised to provide updates as the situation evolves.
Volvo has also decided to withdraw financial forecasts for 2025 and 2026, reflecting the uncertainty in the market. CEO Håkan Samuelsson highlighted these difficulties in an interview with CNBC, noting persistent market headwinds. “We are facing a volume decline, coupled with intense price competition and new entrants in the electric vehicle market, all of which complicate future predictions,” Samuelsson stated.
The company is turning its focus towards managing what it can control through its cost action package, aiming to streamline efforts and enhance efficiency. In its earnings report, Volvo indicated plans to refine its product lineup in the U.S. to concentrate on growth opportunities and optimize its existing manufacturing capabilities to produce vehicles more locally.
In another development, U.S. President Donald Trump recently instituted a 25% tariff on imported vehicles, with an additional intention to levy tariffs on components such as engines and transmissions, set to be enacted by May 3.
Amidst these turbulent market conditions, Volvo Cars reported that its share of “electrified cars,” defined as any vehicle equipped with a charging cord, reached 43% in the first quarter. The company is targeting this segment to represent 90% to 100% of its global sales by 2030.
Source
www.cnbc.com