Volvo is preparing for a more difficult 2025. The Swedish automaker announced a decline in operating profit in the fourth quarter of 2024, and it believes the trend will continue into the new year due to continuing difficult market conditions.
Majority-owned by Chinese firm Geely, the company says it doesn’t expect the market to experience the same level of growth as in recent years. Increased competition, particularly from rivals from China, will probably lead to price cuts across the sector.
Volvo CEO Jim Rowan said in a statement that “As a result, it will be challenging to reach the volumes and profitability level we achieved in 2024.”
Even so, the company reiterated its forecast of a core operating profit margin of 7-8 percent.
Fourth-quarter operating profit for Volvo was SEK 3.9 billion ($510 million CAD), compared with SEK 5.4 billion the previous year ($710 million). Earnings include an impairment charge of SEK 1.7 billion ($220 million) relating to its Novo Energy battery joint venture.
Excluding joint ventures and associates, operating profit was 6.3 billion crowns ($830 million CAD), down from 6.7 billion crowns ($880 million) the previous year.
Reuters indicated the performance drop stems from weakened EV demand in recent years, partly due to the lack of affordable models and the slow roll-out of charging stations.
Manufacturers are also bracing themselves for the effects of European and American tariffs on electric cars made in China.
The Volvo EX30 was the third best-selling electric vehicle in Europe last year. For the time being, it is manufactured exclusively in China, subjecting it to European customs duties of almost 30 percent, compared with 10 percent previously.
Production in Ghent, Belgium, is scheduled for the second half of 2025, which will give the company some breathing space, but until then, Volvo must absorb the cost of the extra customs duties on EX30s made in China and sold in Europe. This is clearly affecting revenues.
Volvo's performance will be one to watch in 2025, both in Europe and the U.S., where in addition to the EX30, a new EX90 is now available, as is a reworked XC90.