Volvo Cars reports a group operating income (EBIT) of SEK 1.9 billion (€173 million) for the first quarter of 2025, following a drop in wholesales (-6%) and adverse currency effects. The result also reflects the current turbulence in the world and a challenging external environment for the automotive industry.
To protect profitability, drive structural efficiencies on direct and indirect costs, and help offset external headwinds, the company has launched an accelerated cost and cash action plan totalling SEK 18 billion (€1.64 billion). The majority of the effects from this plan will be realized in 2026. Regarding the Ghent plant, the managers assure that all projects are on course and that the new people necessary to build the EX30 are getting hired.
The plan includes SEK 3 billion €273 million) in variable cost actions and SEK 5 billion (€455 million) in indirect spend efficiencies, half of which will impact EBIT already in 2026. Furthermore, SEK 10 billion(€910 million) will be added in additional cash actions to reduce working capital and capital expenditures during 2025 and 2026.
Redundancies
As previously communicated, the reductions in investments are in addition to the lower investments already planned. As part of the action plan, there will be redundancies at its operations around the globe, but the company will come back with more details as soon as possible.
“The automotive industry is in the middle of a difficult period with challenges not seen before,” said Håkan Samuelsson, recently reappointed Volvo Cars CEO. “Over the last few weeks, I have worked with the management team and other colleagues on a plan to make the company stronger and more resilient.”
“While our strategy is clear, we must improve at delivering results. Given the turbulence in the market, we need to improve our cash flow generation further and lower our costs. While we still have much to do, our direction focuses on profitability, electrification, and regionalisation,” he added.
Sudden return
Not so long ago, Samuelsson was reappointed as CEO of the Swedish Geely subsidiary. The now 74-year-old Swede, who left two years ago, had gained an almost mythical status while leading the manufacturer into electrification with astonishing production and financing results. His Chinese bosses have called him back to turn the downward course around again.
To reduce costs, Volvo will rely more on the parts and development of its mother company, Geely, and share platforms, techniques, and parts with sister companies like Polestar, Zeekr, Smart, Lynk & Co, and others.
Samuelsson’s big challenge (he’s in for another two years) will be to regain financial stability while keeping the perfect Swedish image Volvo has succeeded in retaining in developing itself as a niche premium car manufacturer.
Regionalizing
Samuelsson will likely cut costs and change Volvo’s worldwide policy by regionalizing its portfolio and adapting models to regional likes and needs. An example of this has already been announced. The company will prioritize the US and China markets.
In China, it will adapt faster to the fast-changing auto sector and customer demands, and the company is looking into giving the market larger operational responsibility. Volvo Cars will soon reveal its first extended-range plug-in hybrid in China, an example of its ability to tailor products to different market demands.
Volvo Cars is also undertaking a strategic restructuring of its operations in the US and has created a new region called Americas. This region includes the US, Canada, and Latin America markets and will be led by Luis Rezende. The restructuring further simplifies the company’s global operations into three streamlined regions: Americas, Greater China, and Europe & Rest of the World.
In the US, the company will sharpen the product line-up it needs for growth and how it can better use its existing manufacturing footprint there in the coming years, producing more cars where they are sold. Just recently, Volvo Cars started production of the critical EX30 at its Ghent factory in Belgium.
The plant managers have assured that the new cost-cutting plan won’t directly affect the plans to expand production in Ghent with the EX30 and that the 350 new jobs will be filled. The EX30 remains a crucial model for the Volvo brand in the coming years, and there are consistent rumors that other future Volvo products could also find their way to Ghent.
