Volvo Cars Q3 Profit Exceeds Expectations

Recently, Volvo Cars announced that in the third quarter of this year, the company's revenue was 86.4 billion Swedish Krona, a decrease of 6.9% year-on-year; EBIT was 6.4 billion Swedish Krona, an increase of 10.3% year-on-year, exceeding expectations, primarily due to the company's cost-cutting measures taking effect faster than anticipated; the EBIT margin was 7.4%, compared to 6.2% in the same period last year. Net profit was 4.5 billion Swedish Krona, a slight increase from 4.4 billion Swedish Krona in the same period last year.

Volvo Cars' gross margin increased from 17.7% in the previous quarter to 20.4%. The company's CEO Håkan Samuelsson stated that the improvement in gross margin is attributed to three factors: the upgraded version of the best-selling model XC60; significant cost savings achieved through collaboration with Geely's supply chain; and the company's cost-cutting initiatives.

Image source: Volvo Cars

In terms of sales, Volvo Cars sold a total of 160,514 vehicles in the third quarter, a decrease of 7% compared to the same period in 2024. However, in September, the company's retail sales saw a slight recovery, driven by its best-ever performance in the UK market, as well as strong results in other markets such as Austria, Turkey, Canada, Brazil, and Mexico.

Driven by the above news, Volvo Cars' stock price surged, with a maximum increase of 40%.

However, despite steady performance, Volvo Cars' third-quarter financial report still reflects the ongoing global economic turbulence and challenging market conditions. In the third quarter, globalLuxury carThe overall market size is shrinking, coupled with fierce market competition (especially in the field of pure electric vehicle models), Volvo Cars is also under pressure in its performance.

This is reflected in the decline in Volvo Cars' revenue, while free cash flow remains negative. This is mainly due to seasonal factors, such as factory shutdowns during holidays. Other factors affecting the company's cash flow include ongoing investments in the all-electric mid-size SUV, the Volvo EX60, set to launch in January 2026; the construction of the Kosice plant in Slovakia; and the production of the ES90 model at the Chengdu plant and the EX30 model at the Ghent plant. Climbing the slope.

However, Volvo Cars' cost-cutting plan has greatly contributed to performance improvement. In the past six months, under the leadership of CEO Håkan Samuelsson, who returned earlier this year, Volvo's new management has significantly reduced costs, advancing a SEK 18 billion cost and cash flow optimization plan to address the issue of declining profits. The company has already laid off 3,000 employees, canceled performance forecasts, and slowed down investment efforts to offset U.S. tariffs, intense competition, andElectric vehiclePressure brought by the slowdown in market growth.

Overall, in the third quarter, the company made faster-than-expected progress in reducing variable and indirect costs. Some of the cost reductions are related to the company's layoff process, which will be completed in the fourth quarter.

Samuelson stated when discussing the results of cost reduction, "What we are seeing now is indeed encouraging. The pace of cost reduction is faster than we anticipated and has exceeded our planned expectations."

Hampus Engellau, an analyst at Handelsbanken, stated, "After Samuelsson resumed his role as CEO, I believe he has a clear vision, shifting the group's strategic focus completely from pursuing growth and market share to focusing on cash flow and profitability." He also mentioned, "The improvement in Volvo Cars' performance this time is mainly due to operational optimizations within the management team, with little assistance from the market."

Volvo Cars has been significantly affected by U.S. import tariff policies since most of its cars sold in the United States are manufactured in Europe. However, the company has recently taken measures to plan the relocation of the production of some hybrid models to the United States in the coming years.

Additionally, recent trade negotiations between the EU and the US have made progress, with the US lowering import tariffs on European cars from the previous 27.5% to 15%. This policy has been in effect since August 1st.

Samuelson stated in an interview with Bloomberg TV, "We need to be a 'customer-centric' American localized company, and I am quite confident about the future of the company."

Despite this, Volvo's Chinese ownership has raised concerns, as the U.S. government is currently increasing its scrutiny of China-related automakers. There are worries that Volvo's sales in the U.S. might face restrictions. However, Samuelsson pointed out that although Volvo's legal team is maintaining regular communication with the U.S. Department of Commerce, there is no urgency in this matter. He stated, "I'm not too worried. We have been deeply rooted in the U.S. market for 70 years and will continue to remain in the U.S. market in the future."

Fredrik Hansson, the Chief Financial Officer of Volvo Cars, told analysts that driven by the dual impact of tariff reductions and rising car prices, the company now expects its full-year earnings before interest and taxes (EBIT) to be slightly below previous expectations due to the impact of tariffs.

He stated, "We now expect that fluctuations in tariffs will lead to a decline of about 1% in the group's EBIT for this year, whereas the company previously anticipated a decline of 1%-2%."

Currently, Volvo Cars is betting on new models, including the plug-in hybrid XC70 SUV, to drive sales growth. This model is produced at the Taizhou plant in China and is primarily supplied to the domestic Chinese market, while also being available in Europe. However, Volvo has not yet specified a timeline for this model's entry into other markets outside Asia. Additionally, Volvo plans to launch the all-electric model EX60 next January, which is the sibling model to its fuel-powered XC60.