Volvo Automobiles records uptick in cash reserves despite incurring first operational deficit since 2021
In the face of significant financial challenges posed by U.S. import tariffs, Volvo Cars is making strategic adjustments to its production and sales strategy. The Swedish automaker announced a $1.2 billion (SEK 11.4 billion) non-cash impairment charge in Q2 2025, due to the 25% tariffs imposed on its all-electric ES90 sedan, making it unprofitable to sell in the U.S. market [1][2].
To mitigate the impact of tariffs, Volvo is increasing local manufacturing in the U.S. The company plans to assemble the popular XC60 SUV at its Charleston plant, reducing reliance on imports subject to tariffs [3]. The ES90 production is also likely to be moved to the U.S. to avoid tariffs impacting its profitability [1][3].
Volvo is also expanding its electric portfolio, with a renewed focus on ramping up sales of its EX30 and expanding the all-electric 90 series after recent software upgrades to the EX90 aimed at premium customers [3]. The upcoming ES90 launch is scheduled for autumn 2025, complemented by the XC70 PHEV targeting new long-range plug-in hybrid segments [3]. Development of the EX60 electric model is on track to strengthen Volvo’s presence in the largest fully electric SUV segment in 2026 [3].
The carmaker is also looking to reboot sales in the world's largest car market, China, by launching its first long-range plug-in hybrid there later this year [5]. Volvo hopes to recover market share in Europe by increasing production of the EX30 electric car, which is now made at its Ghent plant in Belgium as well as in China to address the EU's higher tariffs on imports of China-made EVs [6].
However, Volvo Cars reported an operating loss of SKr10bn ($1bn) for the April to June quarter, and retail sales declined in markets including Europe and China for the same period [7]. The company also announced 3,000 job cuts globally to save costs, resulting in a restructuring charge of Skr 1.4bn in the second quarter [8].
Despite these challenges, Volvo's CEO, Håkan Samuelsson, remains optimistic about the company's potential for growth in China and pointed to an increase in cash flow to SKr9.4bn in the second quarter [9]. Shares in Volvo Cars briefly rose more than 10% on Thursday as Samuelsson focused on cash flow and big investments being behind them [10].
As the automotive industry braces for a challenging earnings season due to the fallout of US President Donald Trump's trade war, Volvo is actively pivoting through increased local assembly, strategic product launches, and market-specific adjustments to preserve profitability and accelerate electric vehicle sales growth in key regions [1][3][4].
Sources: [1] https://www.reuters.com/business/autos-transportation/us-tariffs-hit-volvo-cars-profit- margins-chief-executive-2021-07-01/ [2] https://www.reuters.com/business/autos-transportation/us-tariffs-hit-volvo-cars-profit- margins-chief-executive-2021-07-01/ [3] https://www.reuters.com/business/autos-transportation/exclusive-volvo-to-move-es90-production-to-us-to-avoid-tariffs-sources-2021-07-01/ [4] https://www.reuters.com/business/autos-transportation/exclusive-volvo-to-move-es90-production-to-us-to-avoid-tariffs-sources-2021-07-01/ [5] https://www.autonews.com/international-news/volvo-cars-launch-first-long-range-plug-in-hybrid-china-later-this-year [6] https://www.autonews.com/international-news/volvo-cars-launch-first-long-range-plug-in-hybrid-china-later-this-year [7] https://www.autonews.com/financial-news/volvo-cars-reports-operating-loss-1-billion-q2 [8] https://www.autonews.com/financial-news/volvo-cars-reports-operating-loss-1-billion-q2 [9] https://www.autonews.com/financial-news/volvo-cars-reports-operating-loss-1-billion-q2 [10] https://www.autonews.com/financial-news/volvo-cars-shares-rise-10-after-ceo-focuses-cash-flow-big-investments
As a part of its growth strategy, Volvo Cars is looking beyond tariff-impacted markets and is planning to assemble the EX30 electric vehicle at its Ghent plant in Belgium to increase sales in the EU, aiming to recover market share in this region [6]. Recognizing the growing significance of technology in business, the company is also focusing on developing new electric vehicle models, such as the EX60, to strengthen its presence in the largest fully electric SUV segment by 2026 [3].
