Swedish automaker Volvo Cars has announced a sweeping cost-cutting plan worth 18 billion kronor ($1.9 billion) to address falling profits and rising global challenges. The company revealed the plan on Tuesday, citing job cuts and a strategic shift as key parts of its response.
Volvo, owned by Chinese group Geely, reported a sharp drop in profit for the first quarter of 2025. Net profit fell 73% compared to the same period last year, reaching just 1 billion kronor.
This major decision comes as the global auto industry faces several new hurdles, including rising tariffs in the U.S., slower electric vehicle (EV) sales in Europe, and tougher competition from Chinese automakers.
Falling Profits and Sales Pressure
Volvo Cars also shared that its sales dropped by 12%, totaling 82.9 billion kronor during the first quarter. The company pointed to reduced demand, market uncertainty, and higher costs as reasons for the decline.
CEO Håkan Samuelsson stated, “The world has changed a lot in the last few years. The automotive industry is in the middle of a very difficult period with challenges we have not seen before.”
Volvo is not alone. European carmakers have been under pressure due to slowing EV growth and the rise of new competitors. The situation became worse after the U.S. government introduced a 25% tariff on imported vehicles in April 2025.
Cost-Cutting Plan Targets 2026
Volvo said most of the cost-cutting actions will take place in 2026. While the exact number of job cuts is not yet clear, the company confirmed that redundancies will occur across global operations.
“As part of the action plan, there will be redundancies at our operations around the globe,” Samuelsson said. “We will come back with more details as soon as possible.”
Volvo also warned that 2025 will be a transition year with continued economic and market challenges. These include macroeconomic shifts, political tensions, and supply chain changes.
Samuelsson noted, “Tougher market conditions and lower volumes combined with increased price pressure and tariff effects are impacting profitability.”
U.S. Tariffs Force Strategy Shift
The recent 25% tariff on vehicle imports to the U.S. has caused major disruptions. To respond, Volvo announced plans to increase production in the United States.
Earlier this month, the company said it would likely add a new model to its U.S. production line. This move aims to reduce costs tied to tariffs and strengthen Volvo’s local market presence.
“We need to adapt to a more regionalised world,” Samuelsson said.
Focus on U.S. and China Markets
Volvo Cars will now refocus its strategy on the U.S. and Chinese markets, aiming to be more responsive to regional needs. The company plans to improve its U.S. product lineup and use local manufacturing more efficiently.
“In the U.S., we will sharpen the product line-up we need for growth,” said Samuelsson. “We are looking at how we can better use the existing manufacturing footprint in the coming years – producing more where we sell.”
In China, Volvo faces stiff competition from fast-growing local EV brands. The company will likely revisit its pricing strategy and product features to stay competitive in this key market.
Industry-Wide Challenges Grow
Volvo’s announcement comes as many automakers are rethinking their strategies. Rising material costs, chip shortages, and now global tariffs have forced companies to cut costs and rethink where they produce cars.
Meanwhile, EV sales in Europe, once a growth area, have started to slow. Experts cite higher interest rates, insufficient charging infrastructure, and pricing issues as factors.
According to analysts, Volvo’s decision is part of a larger shift in the industry. More companies may soon follow with cost-cutting plans, especially those relying heavily on international supply chains.
What’s Next for Volvo?
The company has not yet said how many workers will lose their jobs, but more details are expected soon. Volvo is also likely to announce further changes in its manufacturing locations and product design to reduce exposure to geopolitical risks.
Volvo is betting that producing more cars locally, especially in the U.S., will help offset tariffs and increase flexibility in supply chains.
