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Volvo Cars will book a one-off charge of SKr11.4bn ($1.2bn) as the Swedish group forecast smaller profits from two critical vehicle models due to US President Donald Trump’s car tariffs and launch delays.
The Geely-owned group is heavily exposed to higher import tariffs in the US and Europe and has already announced a cut of 3,000 jobs globally to save costs.
Volvo Cars on Monday blamed the non-cash impairment charge on launch delays and additional development costs for its flagship EX90 sport utility vehicle, which led to lower margins.
The company added it was unable to sell its new ES90 — which is built in China — profitably in the US due to the 25 per cent tariffs Trump has imposed on imports of foreign-made vehicles.
The group has said it wants to increase production in South Carolina to address the higher US tariffs.
German carmakers and Volvo Cars had earlier expressed hope that the US would adjust its policy to allow them to offset import tariffs if they also exported vehicles from America. But there has been no such concession from the Trump administration, which over the weekend threatened to impose tariffs of 30 per cent on the EU from August 1.
“Given market developments such as import tariffs in the US, development and launch delays for the EX90 and strategic investment prioritisations, we have reassessed volume assumptions for these two cars,” said Fredrik Hansson, chief financial officer at Volvo Cars. This has led to “lower than planned lifecycle profitability”, he added.
To address the EU’s higher tariffs on imports of electric vehicles made in China, Volvo Cars will produce its EX30 EV model in its Ghent plant in Belgium, as well as in China from this year.
Beyond the tariffs, the carmaker was also forced to temporarily pause production at its Charleston, South Carolina, plant in May due to a supplier issue, while the company has suffered from a slower than expected production boost for the EX90 due to software issues.
Bernstein analyst Stephen Reitman said the group’s second-quarter results, which will be released on Thursday, would probably be the weakest for the company for 2025, with gross margins likely to fall to 16 per cent from 18 per cent in the previous quarter.
“Volvo will feel the full effect of EU-China and EU-US tariffs before mitigations start to kick in from third quarter,” he added.
Shares in Volvo Cars fell 4.4 per cent on Monday following Trump’s tariff threat on the EU, bringing its year-to-date decline to 25 per cent.